Purchasing Payments

In this activity, the students use their understanding of percentages in a hire purchase context. This activity is a good opportunity for the students to use calculators, but they also need to use their number sense and estimation skills. Hopefully, the following comments will be overheard as the students work:
“The answer will be about ...”
“That can’t be right, it’s too much.”
“That’s easy. I don’t need the calculator for that.”
Encourage the students to think about when, how, and why they use a calculator.
The students should notice that in all the repayment options, the amount repaid is more than the original retail price (between $10 and $96 more). This is because interest or service fees are charged on hire purchases.
Some students may decide that they would rather save up all the money needed and buy the stereo for cash to avoid paying interest. Other students may decide that the extra $10 they pay (if they take Loud Noise Company’s best deal) is worth it because they get the stereo straight away.
As an extension, the students could investigate hire purchase, rental, and mortgage and loan arrangements, using local information and situations. They could look at a range of items, such as cars, home appliances, houses, rental property, credit, and so on.

Answers to Activity

1. a. The Loud Noise Company offers the best timepayment deal (option 1). (25% deposit and $27.42 per month for 12 months = $435.29.)
b. It is cheaper than the others by:
$56.11 (Base Control Ltd, $491.40, option 1)
$34.12 (Base Control Ltd, $469.41, option 2)
$59.71 (Booms, $495, option 1)
$51.01 (Booms, $486.30, option 2)
$84.31 (Loud Noise Company, $519.60, option 2).
2. Various answers, as long as they are close to $435.29 in total (to be the best deal). For example, no deposit with $12.10 per month for 36 months is $435.60, or 10% deposit ($43.50) and $16.31 per month for 23 months, with a final payment of
$16.37, is $435.00.