 Buying a car. What it really costs with finance charges. There's a lot to know when buying a car. You will learn how to calculate monthly payments and how to understand finance charges and the annual percentage rate or APR. So you've decided to buy a new car. You don't have enough cash to buy that car. So you know you will need to borrow money to do so. Anytime you borrow money to buy a car, you will have to pay finance charges on that money. The more money put down on the car, the less the loan will be. A money-wise decision would be to save as much as possible to put towards purchasing a new car. Thus your loan would be smaller and you would pay less in finance charges. It is important to know your rights as a consumer. The truth in lending law states that car dealers who lend money must tell the borrowers the amount or rate of the finance charges. This rate is called the annual percentage rate. The annual percentage rate is already figured into monthly payments and the down payment. So let's consider a few cars. The first car you decide to look at is a new sedan. The monthly payment is $225 for 60 months with $2,500 down. The tax and registration fee would be $573.60 and the APR is 12.10%. Given that information, you can figure out the total cost of the car if you take out the loan for 60 months. Car dealers will often give a customer a reduced price if the buyer pays cash for the car. For this sedan, if you paid cash with no loan, you could buy this car for $12,595 plus tax and registration. So the car, if paid for with cash, would cost $13,168.60. Now that you know the price of the car if you paid cash and the price if you took out a 60 month loan, you can easily calculate what you are paying for the loan. Subtract the smaller price from the larger one. Your answer will be the cost of the loan. So the interest cost is $3,405. You decide to look at one more car. This time, you're considering a sports car. This car is $255 per month for 60 months with $3,000 down. The tax and registration fee would be $573.60 and the APR is 12.10%. Knowing this information, calculate the total cost of the car if you choose to take out the 60 month loan. The sports car would cost $14,500 plus tax and registration if you paid cash for the car. Figure out what the loan is costing you for this car. You have now completed the learning object. Buying a car, what it really costs with finance charges.