1. 9.1 P URCHASING A N EW V EHICLE Sticker Prices are required by law. What is included in the sticker price? Base Price: the price of the engine, chassis, and any other piece of standard equipment for a particular model. Options: the extras for convenience, safety, or appearance, such as a sunroof, and air- conditioning. Destination Charge: the cost of shipping the vehicle from the factory to the dealer. What are some other things that may be shown on the sticker of a new vehicle? Calculations: Sticker Price = Base Price + Options +Destination Charge

2. 9.2 D EALER ’ S C OST Dealers pay less than the sticker price for both the basic vehicle and the options. Often reported in consumer magazines as a percent of the sticker price. Once you know the dealer’s cost, what can you figure out? You may save money by making an offer that is higher than the estimated dealer’s cost but lower than the sticker price. By subtracting you can figure out the dealer’s profit. This helps you conclude how much the dealer might be willing to negotiate on cost. Calculations: Dealer’s Cost = Percent of Base Price + Percent of Options Price + Destination Charge Percent of Base Price = Base Price x Percent of Dealer’s Cost on Base Price Percent of Options Price = Total Price of Options x Percent of Dealer’s Cost on Options

3. 9.3 P URCHASING A U SED V EHICLE Dealers advertise used vehicles for prices that are higher than what they expect you to pay. Used-Vehicle Guides are published monthly by the National Automobile Dealers Association (NADA) or Vehicle Market Research (VMR). Give average prices of vehicles Can help you make decisions about how much to pay for a used vehicle. The price and availability of repair parts may make some cars more costly to repair and insure. It is important to take everything into consideration. Calculations: Average Retail Price = Average Retail Value + Additional Options – Options Deductions – Mileage Deductions

4. 9.4 V EHICLE I NSURANCE Liability Insurance: Coverage in case of an accident that causes bodily injury and property damage. If the insurance company offers 25/100: The insurance company will pay up to $25,000 to any one person injured. The insurance company will pay up to $100,000 if more than one person is injured. Comprehensive Insurance: Protects you from losses due to fire, vandalism, theft, etc. Collision Insurance: Pays to repair your vehicle if it’s in an accident. Deductible Clause: Amount you are required to pay for any repair bill. (May have a deductible for each type.) $100 deductible means you pay the first $100 of the repair bill and the insurance company pays the remaining amount. Cost of Insurance is based on annual base premium. Amount of insurance you want. How old your vehicle is. The insurance-rating group (depends on size and value of the vehicle). Annual Premium: The amount you pay each year for insurance coverage. Annual base premium: depend on amount of coverage you want Driver-rating factor: depends on age, marital status, amount of driving each week, etc If more than one driver is being insured than the highest rating is used. Insurance companies use tables to determine base premium. Calculations: Annual Base Premium = Liability Premium + Comprehensive Premium + Collision Premium Annual Premium = Annual Base Premium x Driver-Rating Factor

5. 9.5 O PERATING AND M AINTAINING A V EHICLE Things to take into consideration: Variable costs: things that increase the more you drive (gas, tires, etc). Fixed costs: things that remain about the same regardless of how many miles you drive (insurance, registration, depreciation, etc). Depreciation: a decrease in the value of the vehicle because of its age and condition. Calculations: Cost per Mile = (Annual Variable Costs + Annual Fixed Costs) ÷ # of Miles Driven

6. 9.6 L EASING A V EHICLE Make monthly payments to the leasing company, the dealer, or the bank for two to five years. You don’t own the car. You are essentially renting it. At the end of the lease, you either return the car to the leasing company or you purchase it. Most common is a closed-end lease. You make a specified number of payments, return the vehicle and owe nothing (unless you damage the vehicle or exceed the mileage limit). If you damage the vehicle or exceed the mileage limit you owe money to the leasing company. Also an open-end lease. At the end of the lease you buy the vehicle for its residual value. Residual value is the expected value of the vehicle at the end of the lease period. Often established at the signing of the lease. With either you must pay all the monthly payments, a security deposit, title fee, and license fee. Calculations: Total Lease Cost = (# of Payments x Amount of Payment) + Deposit + Title Fee + License Fee

7. 9.7 R ENTING A V EHICLE Some agencies charge a daily rate plus a per-mile rate. Others charge a daily rate only. Both require you to pay for the gas used. May need to pay for insurance. Often the insurance has a collision deductible clause that states that you will pay for a portion of any damage to the vehicle. You can obtain complete insurance coverage with a collision waiver by paying an additional charge per day. Calculations: Cost per Mile = Total Cost ÷ # of Miles Driven