Buying and Financing a Car — slides
Financial Literacy Club
Money After High School · Lesson 6
Buying and Financing a Car
Total cost of ownership and how auto loans work.
14-minute lesson · learnwithflc.org
Buying and Financing a Car · 1 / 20
Financial Literacy Club
Money After High School · Lesson 6
Buying and Financing a Car
Total cost of ownership and how auto loans work.
14-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Calculate the total monthly cost of owning a car
- Explain depreciation
- Apply the 20/4/10 guideline
Warm-up
A car ad says “$299 a month!” What else will you pay besides that?
Think, then write your answer.
The big idea
Buying and Financing a Car
Total cost of ownership and how auto loans work.
Money After High School · Lesson 6
The price tag is only the beginning. The total cost of ownership includes the loan payment, insurance, gas, maintenance, repairs, registration, and parking.
Money After High School · Lesson 6
New cars lose value fastest in their first few years (depreciation). A reliable used car often costs far less for the same transportation.
Money After High School · Lesson 6
- Get pre-approved for a loan at a bank or credit union before visiting a dealer, so you know your rate.
- Negotiate the total price, not the monthly payment.
- Get a used car inspected by an independent mechanic before buying.
- Compare insurance quotes before you buy — young drivers often pay a lot.
Money After High School · Lesson 6
A common guideline: 20/4/10
Put at least 20% down, finance for no more than 4 years, and keep total car costs under about 10% of your gross income. It's a rule of thumb, not a law — but it keeps a car from crowding out everything else.
Money After High School · Lesson 6
Required coverage
Most states, including Texas, require drivers to carry liability insurance. Lenders usually also require comprehensive and collision coverage until the loan is paid off.
See it
A hypothetical $15,000 used car financed at 7% for 4 years: Loan payment ($15,000 at 7% for 4 years) $359; Insurance (young drivers often pay more) $180; Gas $120; Maintenance and repairs (set aside) $60; Registration, inspection, and fees $15. Total: about $734 a month.
- Loan payment ($15,000 at 7% for 4 years)
- $359
- Insurance (young drivers often pay more)
- $180
- Gas
- $120
- Maintenance and repairs (set aside)
- $60
- Registration, inspection, and fees
- $15
- Total monthly costthe loan is only 49%
- $734
Real example
Two cars, one budget
Marco has budgeted $400 a month for a car. The loan on a $15,000 used car is about $359 — it fits!
Then he adds everything else: insurance, gas, maintenance, and fees. The real total is about $734 a month. He switches to a $9,000 used car with a bigger down payment and finds a cheaper insurance quote — and stays within budget.
Try it together
Try it: finance a car
Try a 4-year loan, then a 7-year loan on the same car. Then try a bigger down payment by lowering the amount.
Your numbers
Results
Monthly payment
$359.19
48 payments at 7% APR
Amount borrowed
$15,000
Total interest
$2,241
13% of what you pay
Total of payments
$17,241
- Principal (amount borrowed) $15,000
- Interest $2,241
Show year-by-year breakdownHide breakdown
| Year | Principal | Interest | Balance left |
|---|---|---|---|
| 1 | $3,367 | $943 | $11,633 |
| 2 | $3,610 | $700 | $8,023 |
| 3 | $3,871 | $439 | $4,151 |
| 4 | $4,151 | $159 | $0 |
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · pairs · 10 min
The True Cost
- A used car costs $15,000. The buyer puts 20% down and finances the rest at 8% APR for 4 years.
- Monthly costs: insurance $150, gas $120, maintenance $60.
- Pairs use the loan calculator to find the payment, then total all monthly costs.
- Pairs check the result against the 10% guideline for someone earning $4,000 a month before taxes.
Check for understanding · 1 of 3
A dealer asks, "What monthly payment are you looking for?"
What's the smartest response?
- AGive a monthly number, so they can make it fit
- BFocus on the total price, and use your own pre-approved loan rate to compare
- CSay you'll take any payment
- DAsk for the longest loan possible
B. Focus on the total price, and use your own pre-approved loan rate to compare
Any payment can "fit" by stretching the loan. Negotiating total price protects you.
Check for understanding · 2 of 3
The loan payment is the only monthly cost you need to budget for when you buy a car.
- True
- False
False
Insurance, gas, maintenance, repairs, and fees often add hundreds more each month.
Check for understanding · 3 of 3
Why should you get a used car inspected by an independent mechanic?
- AIt's required by law everywhere.
- BTo uncover expensive problems before you buy
- CTo raise the price
- DMechanics can lower your interest rate.
B. To uncover expensive problems before you buy
An inspection can reveal hidden issues that would cost far more than the inspection fee.
Remember
Key takeaways
- Total cost = payment + insurance + gas + maintenance + fees.
- New cars depreciate fastest early on.
- Get pre-approved; negotiate total price.
- 20/4/10: 20% down, ≤4 years, ≤10% of income.
Discuss
Talk it over
- Do you need a car where you live? What are the alternatives and their costs?
- Why do dealers focus on monthly payments?
Exit ticket
What does “depreciation” mean for a car?
Answer on your exit ticket before you leave.
Nice work today.
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learnwithflc.org/courses/money-after-high-school/cars
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