How Long Will It Take to Save Up for a Car?

Question

Required Materials
Microsoft Excel
In the lessons, we learned how to create an Excel spreadsheet to visualize the time it would take to save up for a trip to Mexico. Here, we’ll do the same but for a different goal. A vehicle to get there!
In this activity, you’ll research and find a reasonably priced vehicle to set your sights on. Then, you’ll set up an Excel “calculator” to determine how much you should save each month and how long it will take you to afford the car.
Step 1: Research Affordable Vehicles
You’ll want to find a vehicle in a realistic price range and one that is reliable enough to make a long trip. Do a bit of research to find a suitable option for your trip, taking note of the full cost.
Step 2: Set Up Your Calculator
Using Microsoft Excel, find a suitable calculator template. Set up your calculator template to calculate the total time daily, weekly, bi-weekly, monthly, and yearly, as we did in the lesson.
Step 3: Input Your Numbers
Now the fun part! Because we have all of our calculations set up already, we can simply enter our estimated vehicle cost to determine how much you would need to save in order to buy the car within a year!
Step 4: Thinking Ahead
Most people do not buy a car outright with cash. Instead, people often get a loan for a vehicle, meaning that they pay it off in monthly instalments over time. This makes buying a car more affordable in the short term, but it can lead to hefty interest payments over time, increasing the vehicle’s total cost.
How can we calculate interest? Here’s a very simplified example of how we might do this. We adjust the cell that calculates our savings goal to the following:
=IFERROR(1.05*(EventCost-AmountSaved), "")
The script will add 5% to the total cost, indicating a 5% annual percentage rate. In the real world, this percentage rate is calculated on a monthly, and sometimes daily, basis, depending on the lender, meaning the numbers will fluctuate and decrease as you pay off your loan—but this gives us a rough look at how interest can increase the total cost of a vehicle.

Answer 1

Let's walk through each step of the process to help you set up your Excel calculator for saving up to buy a car.

Step 1: Research Affordable Vehicles

1. Choose a Vehicle: Look for a reliable, reasonably priced vehicle suitable for longer trips.
2. Example Vehicle: Let's say you found a used Honda Civic for $15,000.
3. Note the Cost: Keep the total cost of $15,000 for your calculations.

Step 2: Set Up Your Calculator

1. Open Microsoft Excel.

2. Create Columns: Set up the following columns:

   • A: Time Frame (Daily, Weekly, Bi-Weekly, Monthly, Yearly)
   • B: Savings Needed per Period

3. Input Time Frames: In Column A, add these entries:

   • A2: Daily
   • A3: Weekly
   • A4: Bi-Weekly
   • A5: Monthly
   • A6: Yearly

Step 3: Input Your Numbers

1. Determine Total Savings Goal: Use the vehicle cost you've selected ($15,000).
2. Calculate Savings Needed:
   • For Daily (A2):
     • Formula in B2: =15000/365
   • For Weekly (A3):
     • Formula in B3: =15000/52
   • For Bi-Weekly (A4):
     • Formula in B4: =15000/26
   • For Monthly (A5):
     • Formula in B5: =15000/12
   • For Yearly (A6):
     • Formula in B6: =15000/1

Step 4: Thinking Ahead

1. Incorporate Interest: Modify the total cost to factor in a 5% interest rate. For this, use the formula for the estimated total cost with interest:

   • Formula to calculate total adjusted cost with interest before saving:
     • Suppose your initial amount saved is stored in a cell, say C1 (set this to $0 for now).
     • Adjust the total cost using:
     • Formula: =IFERROR(1.05*(15000-C1), "")

2. Update the Savings Calculation: Replace the previous formulas in column B with the new total cost:

   • For Daily (B2):
     • =(IFERROR(1.05*(15000-C1), "")/365)
   • For Weekly (B3):
     • =(IFERROR(1.05*(15000-C1), "")/52)
   • For Bi-Weekly (B4):
     • =(IFERROR(1.05*(15000-C1), "")/26)
   • For Monthly (B5):
     • =(IFERROR(1.05*(15000-C1), "")/12)
   • For Yearly (B6):
     • =(IFERROR(1.05*(15000-C1), "")/1)

Example Summary

• Daily Savings: =$41.10 (e.g., based on total cost estimations)
• Weekly Savings: =$287.50
• Bi-Weekly Savings: =$575.00
• Monthly Savings: =$1250.00
• Yearly Savings: =$15,000.00

Final Note

Now that you have your calculator set up, you can easily adjust the vehicle price or the interest rate as needed. This will allow you to see how these changes affect the savings required in various time frames! Always remember to save a little extra for potential maintenance or unexpected costs as well.