Presentation on theme: "Buying a car Vocabulary Quiz Friday. Vocabulary APR ASE Certified Mechanic: Bait and Switch The annual percentage rate for a loan. Also known as the interest."— Presentation transcript:
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 mechanics 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.
Vocabulary Base Price Budget Certified Used Car 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.
Vocabulary Collision & Comprehensive Insurance Cost of the loan Credit Life Insurance "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
Time to Pick a Car and Get on the Road Closest to the MSRP (Manufacturer s Suggested Retail Price)Closest to the MSRP (Manufacturer s Suggested Retail Price) Without going over – wins!
2005 Honda Civic LX Automatic TransmissionAutomatic Transmission Dual Zone Air ConditionerDual Zone Air Conditioner Keyless EntryKeyless Entry Auto Lock BrakesAuto Lock Brakes
20-10 Rule 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. monthly payments shouldnt 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 shouldnt 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.
Consumer Decision Making Deciding to spend your money 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?
Consumer Decision Making Deciding on the right purchase 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?
Consumer Decision Making Before you begin shopping: 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.
Shopping for a used car New Car Dealers Used Car Dealers Private Parties 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
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.
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 dealers 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.
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
Vehicle Expenses Cost of the Vehicle Sales Tax Routine Maintenance Insurance License & Registration Unexpected Repairs Gas Depreciation All of these add up quickly!
New vs. Used How much is a new car worth 5 years from now? –Most Cars: 22 - 25% of the original value –Honda Accord or Toyota Camry: 60% of original value Source: Kelly Blue Book
A Big and Important Purchase New Vehicle is the 2 nd most expensive purchase in life. –1 st 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
Vehicle Identification Number VIN is a 17-character number Where is it? –Left side of the dash –Inside of drivers doorjamb –Vehicles title card Information specific to the vehicle
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.
Model Specific type of make –Taurus (Ford) –Accord (Honda) –Altima (Nissan) –Corrola (Toyota) The model year –Not necessarily the year it was built
Type Pickups Sport Utility Vehicles Sport Utility Trucks Compact Cars Mid-size Cars Full-size Cars Mini-vans Full-size Vans Sports Cars
Car Buying: 4-Step Process 1.Research 2.Check out the cars 3.Set a target price 4.Shop for financing
More Vocab Invoice Price Manufacturers original price but not the dealers cost.
All of the Finance Extras Be prepared to hear about the extras: 1.Credit Insurance 2.GAP Coverage 3.Extended Warranty 4.Extended Service Contract 5.Exterior & Interior Finish Protection 6.Undercoating or Rustproofing 7.VIN Etching 8.Dealer Prep Fees
Number of Years to Finance? Recommend 3 1/2 - 4 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.
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.
Extended Warranty Takes effect after the factory warranty expires. You dont 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.
Extended Service Contract May duplicate warranty. Doesnt cover common repairs like brakes or clutches. Requires routine maintenance. Look out for exclusions that deny coverage.
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 persons name.
Pros & Cons of Leasing Pros –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