Put Yourself in the Driver’s Seat Researching Car Costs Put Yourself in the Driver’s Seat Researching Car Costs Use limitations: These materials may be used only for nonprofit, noncommercial educational purposes. These materials may not be used in connection with any sale, advertisement, endorsement, or promotion of any service, product, person, or business and may not be sold or offered for sale. 1

Welcome and Introductions 2

Getting Ready to Hit the Road  Take your time.  Do your research.  Stay in control of the deal.  Know what you can afford.  Take your time.  Do your research.  Stay in control of the deal.  Know what you can afford. 3

Getting Ready to Hit the Road (continued)  Understand the true cost of ownership.  Save money by making thoughtful buying decisions.  Love what you drive!  Understand the true cost of ownership.  Save money by making thoughtful buying decisions.  Love what you drive! 4

 Learn to research the kind of car you need, want, and can afford to buy—and own (i.e., maintain and repair).  Figure out how to pay for a car.  Start searching for a car to buy.  Complete the car-buying process.  Learn to research the kind of car you need, want, and can afford to buy—and own (i.e., maintain and repair).  Figure out how to pay for a car.  Start searching for a car to buy.  Complete the car-buying process. 5 Objectives

The Car-Buying Process 1.Get a rough idea of what you want and need. 2.Find out if you can afford it. 3.Do serious research on the car and all its costs. 4.Figure out how to pay for the car. 1.Get a rough idea of what you want and need. 2.Find out if you can afford it. 3.Do serious research on the car and all its costs. 4.Figure out how to pay for the car. 6

The Car-Buying Process (continued) 5.Start looking at cars. 6.Check out the car you want to buy. 7.Complete the buying process. 5.Start looking at cars. 6.Check out the car you want to buy. 7.Complete the buying process. 7

 Start with needs: Make, model, seating, performance, reliability in varying weather.  Consider wants: Convenience, assistive devices, entertainment, comfort, performance, appearance, resale value.  You may be able to get more “wants” if you buy a used car.  Start with needs: Make, model, seating, performance, reliability in varying weather.  Consider wants: Convenience, assistive devices, entertainment, comfort, performance, appearance, resale value.  You may be able to get more “wants” if you buy a used car. 8 Deciding on the Type of Car

Researching Average Costs  Where to start: Look at cars priced at an amount that is half of your annual income— if you make $24,000 per year, look at cars priced below $12,000.  Rough guideline: Spend only 15% of after-tax income on transportation, including car payment, insurance, gas, and maintenance.  Where to start: Look at cars priced at an amount that is half of your annual income— if you make $24,000 per year, look at cars priced below $12,000.  Rough guideline: Spend only 15% of after-tax income on transportation, including car payment, insurance, gas, and maintenance. 9

Researching Average Costs (continued)  Where to look: Reliable websites such as or Newspaper ads. Car guides and magazines.  Where to look: Reliable websites such as or Newspaper ads. Car guides and magazines. 10

Researching Average Costs (continued)  Review your spending plan to see how much money you can spend on car costs.  Revise your car choice if necessary.  Review your spending plan to see how much money you can spend on car costs.  Revise your car choice if necessary. 11

Performing Serious Research  Research costs on the specific car you want. Upfront costs: car price, sales tax, and registration and license plate fees Insurance rates (monthly premiums) and types of coverage  Research costs on the specific car you want. Upfront costs: car price, sales tax, and registration and license plate fees Insurance rates (monthly premiums) and types of coverage 12

Performing Serious Research ( continued)  Ongoing costs and maintenance (search online for “cost of car ownership”): Gas, oil changes Tire rotation, brake tuneup, windshield wiper replacement Repairs, license plate renewal  Ongoing costs and maintenance (search online for “cost of car ownership”): Gas, oil changes Tire rotation, brake tuneup, windshield wiper replacement Repairs, license plate renewal 13

Paying for the Car  Down payment options: No-money-down offers Trade-in Savings, bonus, tax refund  Down payment options: No-money-down offers Trade-in Savings, bonus, tax refund 14

Paying for the Car (continued)  Financing options: Bank or credit union loan Insurance company loan Dealer financing— beware teaser rates  Financing options: Bank or credit union loan Insurance company loan Dealer financing— beware teaser rates 15

Comparing Interest Rates  Find an auto loan calculator online.  Consider a $15,000 car with a five-year loan.  Find an auto loan calculator online.  Consider a $15,000 car with a five-year loan. 16

Comparing Interest Rates (continued)  Example: 2.75% rate for excellent credit: $ per month. $17,358 over the life of the loan.  Example: 13.5% rate for deep subprime credit: $ per month. $22,366 over the life of the loan.  That’s a difference of $5,000!  Example: 2.75% rate for excellent credit: $ per month. $17,358 over the life of the loan.  Example: 13.5% rate for deep subprime credit: $ per month. $22,366 over the life of the loan.  That’s a difference of $5,000! 17

Leasing vs. Buying  Pros: Affordable way to get a new car if you need it for work (i.e., real estate, contractor)  Cons: Paying for and maintaining a car you will never own, mileage limit, damage charges  Use “Should I Lease or Purchase an Auto?” calculator at  Pros: Affordable way to get a new car if you need it for work (i.e., real estate, contractor)  Cons: Paying for and maintaining a car you will never own, mileage limit, damage charges  Use “Should I Lease or Purchase an Auto?” calculator at 18

Shopping for the Car  Experts can help save you money in the long run. Car broker Buying service through a warehouse club, insurance company, credit union, or bank Nonprofit programs that help find cars for people with limited income  Experts can help save you money in the long run. Car broker Buying service through a warehouse club, insurance company, credit union, or bank Nonprofit programs that help find cars for people with limited income 19

Shopping for the Car (continued)  Timing:  Consider last year’s model.  Last two weeks of December; July to October  Consider the potential consequences of buying from friends or family.  Timing:  Consider last year’s model.  Last two weeks of December; July to October  Consider the potential consequences of buying from friends or family. 20

Test Driving the Car  Drive the actual car you want to buy. City streets, highways, hills, and mountains Parallel parking, public parking garages Other typical driving conditions in your area  Drive the actual car you want to buy. City streets, highways, hills, and mountains Parallel parking, public parking garages Other typical driving conditions in your area 21

Test Driving the Car (continued)  Obey the 24-hour rule:  Do not buy on the spot.  Go home and think about it.  Obey the 24-hour rule:  Do not buy on the spot.  Go home and think about it. 22

Checking Out a New Car  Ask for discounts on showroom models.  Do not pay extra for factory orders.  Compare the cost of extended warranty options with the maintenance track record of car.  Ask for discounts on showroom models.  Do not pay extra for factory orders.  Compare the cost of extended warranty options with the maintenance track record of car. 23

Checking Out a Used Car  Have the condition of the car assessed by an independent mechanic or diagnostic center.  Get a vehicle history report to review.  Number of previous owners.  Mileage—beware odometer fraud.  Accidents, mechanical problems.  Have the condition of the car assessed by an independent mechanic or diagnostic center.  Get a vehicle history report to review.  Number of previous owners.  Mileage—beware odometer fraud.  Accidents, mechanical problems. 24

Checking Out a Used Car (continued)  Research “lemon laws” in your state.  Ask about extended warranty options.  Research “lemon laws” in your state.  Ask about extended warranty options. 25

Completing the Buying Process  Negotiate with dealers on car price and trade-in price.  Watch out for new car add-ons: Fabric protector, undercoating, no-wax shine.  Understand the contract.  Don’t sign anything you don’t understand.  Negotiate with dealers on car price and trade-in price.  Watch out for new car add-ons: Fabric protector, undercoating, no-wax shine.  Understand the contract.  Don’t sign anything you don’t understand.

1.Learn to research the kind of car you need, want, and can afford to buy—and own (i.e., maintain and repair). 2.Figure out how to pay for a car. 3.Start searching for a car to buy. 4.Complete the car-buying process. 1.Learn to research the kind of car you need, want, and can afford to buy—and own (i.e., maintain and repair). 2.Figure out how to pay for a car. 3.Start searching for a car to buy. 4.Complete the car-buying process. 27 Summary

 Consumer Reports:  National Endowment for Financial Education:  U.S. Department of Energy:  USA.gov–Government Made Easy:  USE Credit Union:  Consumer Reports:  National Endowment for Financial Education:  U.S. Department of Energy:  USA.gov–Government Made Easy:  USE Credit Union: 28 Resources