3.1.5 Practice - Making A Smart Automobile Purchase (Practice)

The document outlines an assignment for analyzing automobile loan options for a character named Eric. It includes steps for reviewing Eric's financial decisions, evaluating loan offers, and making responsible borrowing choices. The assignment emphasizes the importance of understanding loan terms, payment responsibilities, and the consequences of late payments.

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3.1.5 Practice - Making A Smart Automobile Purchase (Practice)

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2026klopfensteinjr

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3.1.

5 Practice: Making a Smart Automobile Practice

Purchase
Personal Financial Responsibility
Name:
Date:

For this assignment, complete the following steps:

1. Part 1: Review: Consider the steps that Eric took to finance his vehicle and
review the options he has available. Record answers to the questions below as
you work through the practice pages.

2. Part 2: Analyze: Decide which loan option is best for Eric. Answer questions
about why you came to this conclusion.

To get the best grade possible, follow the instructions in the assignment closely, and
answer all of the questions completely. This assignment is worth 40 points.

Part 1: Review

1. Write a list of at least three things that Eric has done right before applying for a
loan. (5 points)

Three things that Eric has done right is doing a careful examination of the loan
application, communicated to the borrowing party, and calculations were performed
accurately

3.1.5 Practice: Making a Smart Automobile Purchase 1/4

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2. Identify at least three factors that may influence Eric's decision, including Eric's
savings and any ways he could reduce the total cost of the loan. (5 points)

Eric should choose a loan with the lowest return and the shortest loan term
available. This is due to the fact that the overall interest rate will be lower.

Part 2: Analyze

3. Review the loan offers that have been provided to Eric. Consider his financial
situation and think about which loan is best for him. Then answer the following
questions. (30 points total)

a. Should Eric choose the loan that is the cheapest overall? Why or why not? (5
points)
Eric should not choose the cheapest loan because Eric stated that he only
wants to pay $500 per month and anything more than that would affect his
credit score.

b. What are the advantages and disadvantages of a shorter-term versus a longer-

term loan? (5 points)
Shorter loan terms typically mean higher monthly mortgage payments, but often have
lower interest rates. And if you pay off your mortgage balance within a shorter term, you
may pay less in interest overall than with a longer-term mortgage.

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c. Which loan should Eric choose? Why? Explain your reasoning in a complete
paragraph, using at least three supporting details. (10 points)

Eric should choose the Dealership to get the loan. I think this because
the dealership loan is the shortest length of loan, which is only 3 years.
The only thing with that is Eric will have to pay a little than he wants to
for the monthly payment.

d. What should Eric do to be a responsible borrower? What should he do if he is

unable to make his loan payments? What are some downsides of late
payments? (5 points)

To be a responsible borrower Eric should pay his monthly payments on time. He

needs to communicate. If for some reason he is unable to make a timely payment,
he must call his lender so that the lender is informed of his current situation. Late
payments can have several downsides. They can damage Eric's credit score, which
can make it harder for him to borrow money in the future. Late payments can also
result in additional fees and interest charges, which can make the loan more
expensive overall. Finally, if Eric continues to miss payments, the lender may take
legal action to collect the debt, which can result in wage garnishment or other
consequences.

e. Does Eric have any other options besides the ones presented here? Try to think
of at least two other options. (5 points)

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copying, reuse, or redistribution is prohibited.
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