1. PURCHASING A VEHICLE Chapter 16

2. Car Buying Terms ■Invoice Price – the manufacturer’s initial charge (including delivery) to the dealer; usually higher than the dealer’s final cost because dealers receive rebates, allowances, discounts, and incentive awards. ■Base Price – the cost of the vehicle with standard equipment and warranty but without optional equipment; price is printed on the Monroney sticker ■Monroney Sticker Price (MSRP) – the information printed on the Monroney sticker, shows base price, manufacturer’s transportation charge, and fuel economy of the vehicle; sticker is required by federal law to be affixed to a new vehicle’s window; only the purchaser may remove it ■Dealer Sticker Price – the Monroney sticker price plus the suggested retail price of dealer- installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating; price is usually on a supplemental sticker.

3. Leasing or Buying A New Vehicle LEASINGBUYING OwnershipMust return the vehicle at the end of the lease unless you choose to buy it you own the vehicle and get to keep it at the end of the financing term Up-front costs May include the first month’s payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration fees, and other charges Include cash price or a down payment, taxes, registration fees, and other charges Monthly payments Usually lower than monthly loan payments because you are paying for the vehicle’s depreciation during the lease term, plus rent charges (like interest), taxes, and fees Usually higher then monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees Early termination Responsible for charges if you end the lease earlyResponsible for any pay-off amount if you end the loan early Vehicle return May return the vehicle at lease end, pay any end- of-lease costs, and walk away May have to sell or trade the vehicle when you decide you want a different one

4. Leasing or Buying A New Vehicle LeasingBuying Future valueThe lessor has the risk of the future market value of the vehicle You have the risk of the vehicle’s future market value MileageMost leases limit the number of miles you may drive; will likely have to pay charges if you exceed limits You may drive as many miles as you want, but higher mileage will lower the vehicle’s trade-in or resale value Excess wearMost leases limit wear to the vehicle; likely have to pay extra charges if you exceed limits No limits or charges but excessive wear will lower the vehicle’s value End of termAt the end of the lease, (typically 2-4 years) you may have a new payment to finance the purchase of the existing vehicle or to lease another vehicle At the end of the loan term (typically 4-6 years), you have no further loan payments

5. The same vehicle can have different prices. How is that possible?

6. Buyer’s Guide ■Look over the Buyer’s Guide on p. 345. ■This form must appear in the window of used vehicles sold by dealers. ■Does it become part of the sales contract with the dealer? Explain

7. Look over the label from a new car on page 349. ■A label like this must appear on a new car when it is sold. ■What federal legislation requires such a label?

8. Types of Automobile Insurance Type of InsuranceWhat it Covers Bodily Injury LiabilityInjuries to other persons if the insured is at fault Property Damage LiabilityDamage to the car(s) or property of others if the insured is at fault CollisionDamage to the insured’s car ComprehensiveLoss or damage to the insured’s car caused by fire, flood, storm, theft, or vandalism Medical PaymentsMedical expenses incurred by anyone occupying the insured’s car Uninsured or Underinsured Motorist Injuries to the insured if another is at fault and has little or no insurance or the insured is involved in a hit-and-run accident

9. Automobile Insurance Coverage look over the chart on p. 351. ■Buying bodily injury and property damage coverage can reduce the financial impact of an accident. ■What type of expenses would be paid for by bodily injury liability coverage?

10. ■What does the federal odometer law require? ■What does APR mean? ■What do lemon laws protect? ■What is comprehensive insurance? ■What is collision insurance? ■What is the duty to notify? ■If you damage your neighbor’s fence while attempting to parallel park, which type of insurance will cover this event?

11. Think about it…. ■Is carrying a higher deductible and paying a lower premium a good idea? –Why or why not? ■What if one of your friends asked to borrow your car for the weekend. –Explain what your decision would be considering insurance coverage, rates, and what might happen if the friend were involved in an accident.