Auto Payment Algebra

1
Auto Payment Algebra

• Orange County Teachers Federal Credit Union
• By Peter Koeppen, Assistant Manager, Consumer
  Loans
• December, 11 2007
• Pacific High School
• San Bernardino City Unified School District

2
Introduction

• Background
• Personal background
• Company background
• Interesting facts

3
Math in the field

• Affordability calculations
• Loan payment calculations
• Percentage/ratio calculations (Percent of credit
  card available credit used and income vs. amount
  of unsecured credit owed)

4
Vocabulary

• Credit
• Good Credit vs. Bad Credit
• Paying the minimum required payment vs. paying
  too little
• Paying on time vs. paying too late
• Never missing a payment vs. missing payments
• Staying within your credit limit vs. going over
  your limit
• The Three Cs of Credit
• Character - How steady are you?
• Do you pay your bills on time and in full?
• How long have you been at your current address?
• How long have you been at your current job?
• Capital What are your assets?
• What do you own? A car? A home?
• Do you have money in a savings account?
• Do you have other investments?
• Capacity Can you repay the loan?
• Do you have steady income?
• Do you make enough money?
• Do you have other debts or obligations?

5
Vocabulary

• Debt-to-income ratio
• The amount of monthly expenses over the amount of
  monthly income.
• New Payment
• Amount of loan, interest rate, term
• Existing Credit Payments
• Simple addition
• Mortgage/rent
• By far the largest obligation for us in Southern
  California
• Gross Monthly Income
• Based on loan application or paycheck stubs, tax
  returns

6
Example

• Lakeisha has decided she wants to buy a new car.
• The auto loan company says her credit is good but
  she needs to have a debt-to-income ratio below
  50. If her existing credit payments are 125 a
  month, her rent is 1,225 and her gross monthly
  income is 3,000, what is the maximum monthly
  auto payment allowed? 

Answer The maximum auto payment allowed is
150.00 a month. What could she do to get the
payment lower?
7
Guided Practice

• Pedro has decided he wants to buy a new car.
• The auto loan company says his credit is okay but
  he needs to have a debt-to-income ratio below
  50. If his existing credit payments are 200 a
  month, his rent is 1,300 and his gross monthly
  income is 4,315, what is the maximum monthly
  auto payment allowed? 

Answer The maximum auto payment allowed is
657.50 a month. Should you buy something just
because you can??? What are some possible
problems Pedro might face if he has this payment
for 5 years?
8
Independent Practice

• Angelina has decided she wants to buy a new car.
• The auto loan company says her credit is good but
  she needs to have a debt-to-income ratio below
  50. If her existing credit payments are 300 a
  month, her mortgage is 2,250 and her gross
  monthly income is 5,000, what is the maximum
  monthly auto payment allowed? 

Answer The maximum auto payment allowed is
250.00 a month. If Angelina makes more money
than Pedro how come he can afford a more
expensive car???
9
Whats my car payment?

• My Car Payment Partner Activity
• Each group of partners will need 1 Random Number
  Selector
• Follow the directions on the My Car Payment
  Activity sheet and work together on each others
  Car Payment Calculation.
• Each partner group should have at least two (2)
  payment calculations.
• Afterwards we will share out!

10
Thank You

• Questions?
• Final thoughts
• Comments