1. Vocabulary Quiz Friday
Buying a car
Vocabulary Quiz Friday

2. Vocabulary APR ASE Certified Mechanic: Bait and Switch
The annual percentage rate for a loan. Also known as the interest rate.
Automotive Service Excellence (ASE) is an impartial, third-party endorsement of a mechanic’s knowledge and experience.
The practice of advertising a car at an unrealistically low price, then switching a customer to a different vehicle at a higher price.
APR
ASE Certified Mechanic:
Bait and Switch

3. Vocabulary
The cost of the car without options, but includes standard equipment and factory warranty.
A plan for spending and saving money during a particular period.
A car that has passed through the dealer's mechanical and physical inspection.
Base Price
Budget
Certified Used Car

4. Vocabulary
"Covers the cost to repair YOUR car if YOU are at fault in an accident or if damage occurs to your car as a result of a natural disaster,vandalism, theft, or fire."
Amount of money you will have to pay back in addition to the money you borrowed.
An insurance policy that will pay your loan obligation if you die or are disabled
Collision & Comprehensive Insurance
Cost of the loan
Credit Life Insurance

5. Time to Pick a Car and Get on the Road
Closest to the MSRP (Manufacturer’s Suggested Retail Price)
Without going over – wins!

6. 2005 Honda Civic LX Automatic Transmission Dual Zone Air Conditioner
Keyless Entry
Auto Lock Brakes

7. 2005 Honda Civic LX
$16,975

8. 2005 Mitsubishi Spyder GT Automatic, 4-Spd w/Overdrive & Sportronic
V6, 3.0 Liter
Leather Interior

9. 2005 Mitsubishi Spyder GT
$28,944

10. 2005 Hummer H2 SUV 7-Spoke Aluminum Automatic, 4-Spd HD
Leather Surfaced Heated Bucket Seats
V8, 6.0 Liter Engine

11. 2005 Hummer H2 SUV
$53,280

12. 20-10 Rule
monthly payments shouldn’t exceed 10% of your monthly net income
If your take-home pay is $400 a month $400 x 10% = $40
Your total monthly debt payments shouldn’t total more than $40 per month.
Note: Housing payments (i.e., mortgage payments) should not be counted as part of the 10%, but other debt should be included, such as car loans, student loans and credit cards.
never borrow more than 20% of your yearly net income
If you earn $400 a month after taxes, then your net income in one year is: 12 x $400 = $4,800
Calculate 20% of your annual net income to find your safe debt load: $4,800 x 20% = $960
So, you should never have more than $960 of debt outstanding.

13. Consumer Decision Making
Do I really need this item?’
Is it worth the time I spend making the money to buy it?
Is there a better use for my money right now?
Deciding to spend your money

14. Consumer Decision Making
What level of quality do I want (low, medium, or high)?
What level of quality do I need?
What types of services and repairs does the dealer offer?
Should I wait until there is a sale on the type of car I want?
Should I buy a new or a used car?
If I buy a used car, should I buy it from a dealer or from a private party?
Deciding on the right purchase

15. Consumer Decision Making
Decide how much you can afford to spend.
Decide which car models and options interest you.
Research the reliability of the model of car you want.
Find out where the nearest repair facility is that works on the type of car you want.
Before you begin shopping:

16. Shopping for a used car New Car Dealers Used Car Dealers
provide quality used vehicles; service department available; higher prices than other sources
specialize in previously owned vehicles; limited warranty (if any); vehicles may be in poor condition
may be a good buy if vehicle was well maintained; few consumer protection regulations apply to private party sales
New Car Dealers
Used Car Dealers
Private Parties

17. Shopping for a NEW car Before you shop
Decide which car model and specific options you want.
Find out the invoice price and the true cost to the dealer of the model and options you want.
Decide how much you are willing to pay the dealer above the invoice price.
Make your offer to as many dealers as possible.
Compare final sales prices with other dealers and buying services.
Before you shop

18. Shopping for a NEW car Before you Shop
Compare financing costs from various sources.
If you already have a car, find out its value independent of the dealer’s trade-in offer.
Try to sell your old car yourself (dealers usually give better deals without a trade-in).
Decide whether you need an optional service contract or credit insurance.
Before you Shop

19. What is a deductible? Deductible
This is the amount per accident that you pay out of pocket before insurance starts to pay
Common deductible amounts are usually $250, $500, and $1000
The higher the deductible amount you pay the lower your premiums are
Deductible

20. Vehicle Expenses Cost of the Vehicle Sales Tax Routine Maintenance
Insurance
License & Registration
Unexpected Repairs
Gas
Depreciation
All of these add up quickly!

21. New vs. Used How much is a new car worth 5 years from now?
Most Cars: % of the original value
Honda Accord or Toyota Camry: 60% of original value
Source: Kelly Blue Book
The first decision is to buy a new car or a used car.

22. A Big and Important Purchase
New Vehicle is the 2nd most expensive purchase in life.
1st is a home
A car is a long-term commitment
Average price:
New vehicle: $25,206.
Used vehicle: $15,568
Know the Basics
VIN, Manufacturer, Make, Model, Year, and Type
A Used vehicle may also be the 2nd most expensive purchase in life. $10,000 difference between the average new vehicle and used vehicle price.
The average price consumers paid for a new vehicle in June 2004 was $25,206, with new cars selling at an average of $22,537 and new trucks at $27,329.
The average price of a used vehicle in June 2004 was $15,568. Used cars sold for an average price of $13,973. Used trucks sold for an average of $17,454—up 4.2 percent.
Source: JD Powers & Associates
A car is a long-term commitment and which car a student buys is n important decision. The student should have a plan for how he or she is going to use the car now and in the future. Does he/she need a truck, a fuel-efficient commuter car, or a car with towing capacity?

23. Vehicle Identification Number
VIN is a 17-character number
Where is it?
Left side of the dash
Inside of driver’s doorjamb
Vehicle’s title card
Information specific to the vehicle
Vehicle Identification Number (VIN): A 17-digit character number used to identify specific information about each car.

24. Manufacturer & Make
Manufacturer:: The company that builds the car. The manufacturer builds makes of cars.
Ford manufacturers Mercury and Lincoln cars.
General Motors manufacturers Pontiac, Buick, Cadillac, Oldsmobile, Hummer, Saturn, and Chevrolet cars.
Honda manufactures Acura cars.

25. Model Specific type of make The model year Taurus (Ford)
Accord (Honda)
Altima (Nissan)
Corrola (Toyota)
The model year
Not necessarily the year it was built
The date of manufacture is listed inside the driver’s door, on the vehicle certification label. This is the actual month and year that the vehicle rolled off the assembly line.

26. Type Pickups Sport Utility Vehicles Sport Utility Trucks Compact Cars
Mid-size Cars
Full-size Cars
Mini-vans
Full-size Vans
Sports Cars

27. Car Buying: 4-Step Process
Research
Check out the cars
Set a target price
Shop for financing
To ensure that you get the right vehicle at the best price, you need to be an informed buyer. That means investing time in research and preparation.
Source: Consumer Reports

28. More Vocab Invoice Price
Manufacturer’s original price but not the dealer’s cost.
Invoice Price

29. All of the Finance “Extras”
Be prepared to hear about the extras:
Credit Insurance
GAP Coverage
Extended Warranty
Extended Service Contract
Exterior & Interior Finish Protection
Undercoating or Rustproofing
VIN Etching
Dealer Prep Fees
The salesman may sell you some of these “extras” before you meet with the dealership’s finance representative. Either way, you should be prepared to hear about and respond to another round of salesmanship.

30. Number of Years to Finance?
Recommend 31/ years.
Average loan is 5 years
Interest rate increases after 5 years because risk is greater
More years will increase the cost of the loan and the amount of interest you pay.
Upside down-when you owe more on the car than it is worth. Usually happens with longer loans.
Interest: The fee charged by lenders for the use of their money.
Some people are taking out six- or seven-year loans. In addition, the people who are buying these cars are often upside down in their current loans. So, you’ll end up owing money on the old car even after you’ve traded it in. It’s a recipe for disaster. If you learn your car is worth less than you owe, keep it.
When you take out loans longer than 5 years, the lender must charge a higher interest rate because the risk is greater. People usually start to dislike their car and want to sell it before five years have passed. So then they try to sell it and end up “upside down” in their loan.
Source: Aug 18, Resist car loans of longer than 4 years
Some people are applying for 8-year loans because they want more car than they can afford, according to the Wall Street Journal. It’s a car loan that outlasts your car. Car loans should be 42 months or less - period. Even if you do four full years (or 48 months) you’re okay, but Clark doesn’t recommend it. Eight years is too dangerous. If you’re two years into a car and you realize you hate the car, you are in bad shape financially and mentally. And, worse yet, the average price people are paying for a car these days is $27,000. If you can’t afford that much car, the answer is not to take out a longer loan. It’s to buy a less expensive car.
Source: wwww.clarkhoward.com, Sep 30, Eight-year car loans are a No-No!
Upside-down: When you owe more on your car than it is worth.
Cost of a loan: Amount of money you will have to pay back in addition to the money you borrowed.

31. GAP Coverage
New cars quickly depreciate within the first 1-2 years of ownership.
You can owe more on your car than it is worth (upside down) as soon as you drive off the lot.
If your car is totaled or stolen, your collision/comprehensive insurance will only cover the market value of the car.
Gap insurance covers the “gap” between the loan value and the market value.
Gap insurance is usually inexpensive. GAP stands for guaranteed auto protection. You will also want to get a quote from your insurance agent for GAP coverage. They will sell you the insurance, and you won’t have to pay interest on it like you would at a dealership where the cost is rolled into the loan.
Gap Insurance: If you car is totaled or stolen, the insurance covers the loan value of your car instead of the car's current market value.
Upside-down: When you owe more on your vehicle than it is worth.

32. Extended Warranty Takes effect after the factory warranty expires.
You don’t have to buy an extended warranty on the same day you buy a new car.
No if vehicle has above-average reliability rating.
Yes if car has below-average reliability rating, and you plan on keeping it well past the factory warranty period. Used cars beyond warranty.
Factory Warranty: Original warranty on a new car and usually lasts for three years or 36,000 miles.
Extended Warranty: Covers bumper-to-bumper damages after the original factory warranty expires.
Don’t have to buy an extended warranty on the same day you buy a new car. You can buy the extended warranty anytime before the original factory warranty expires.
Consumer Reports publishes their predicted reliability ratings for cars annually in April. Their reliability ratings will let you know if a vehicle has and above-average or a below-average record.

33. Extended Service Contract
May duplicate warranty.
Doesn’t cover common repairs like brakes or clutches.
Requires routine maintenance.
Look out for exclusions that deny coverage.
Extended Service Contract: Optional protection on specified mechanical and electrical components of the vehicle available for purchase to supplement the warranty coverage provided with the new or used vehicle.
You do not have to buy a service contract the day that you buy the car, so the best option is to go home and think about it.
Auto Service Contracts
Service contracts are usually high-profit add-ons, costing hundreds to more than $1,000.
May duplicate warranty coverage.
Common repairs for parts like brakes and clutches generally are not included in service contracts.
Watch out for exclusions that deny coverage for any reason.
If you don’t keep up with the manufacturer’s recommended routine maintenance, they can void the service contract.
Ask these questions:
Does the dealer, the manufacturer, or an independent company back the contract?
What happens if the provider goes out of business?
How are claims handled?
Can you choose among several dealers or repair centers?
Is the car covered if it breaks down on a trip or if you move out of town?
Do you need prior authorization for repair work?

34. The Benefits of Financing
You establish credit
Once 18, take out at least a 2-year loan and make on-time, in-full payments.
Before the age of 18, you will have to finance the vehicle in another person’s name.
Remember to review every document carefully before signing.

35. Pros & Cons of Leasing Pros Cons Annual mileage limits
Lower Payments usually lower
Pay for depreciation + rental fee
Option to Buy
Cons
You are renting-not buying-and you have to return the car
Annual mileage limits
Usually 12,000 – 15,000
Must pay 10 to 25 cents for each additional mile above the annual agreement
Must return all items in car
Negotiate the purchase price of the vehicle as if you were going to buy. Once you have a firm price, then bring up your desire to lease.
Buy extra miles up front if there's a risk of running over the standard allotment. Excessive mileage at the lease's end is typically charged at a higher rate.