You are considering trading in a car for a newer used vehicle so that you can have dependable transportation for commuting to work. You still owe $5,130 to the credit union for your current car, or $285 per month for the remaining 18 months of the 48-month loan. The trade-in value of this car plus $1,000 that you earned from a freelance job should couple to pay off the auto loan and leave $1,250 for a down payment on the newer car. You have agreed on a sales price for the newer car of $21,000.

1. What are your options to obtain financing?

2. Using the information in Table 7-2 on page 219 (or in the picture below), calculate the monthly payment for a loan period of three, four, five, and six years at 6 percent APR. Describe what happens as you extend out the loan period?

3. How do you decide what loan to take?