1. What is the average cost of a brand new car? $31,252

2. Paying for a Vehicle Unit 9

3. Pricing Invoice price – How much it cost the dealership to buy the car from the manufacturer (Ford) MSRP (Manufacturer’s suggested retail price) – How much the manufacturer suggests the dealership should try to sell the car for Sticker price – How much the dealership tries to sell the car for with any options added on Book value – How much the car is really worth KBB.com

4. Negotiation Tips Dealerships need to make profits – Start your offers from the invoice price and work your way up Don’t discuss your trade-in value until AFTER you have agreed on a price for the new/used car Don’t consider manufacturer rebates until AFTER you have agreed on a price for the new car – These come from the manufacturer, not the dealer; they don’t hurt the dealership at all

5. Payment Options Cash – Pay for the full cost of the car with the money you have – Not usual, but a good option if you have enough cash – Why? No interest payments Loan (financing) – Pay monthly installments – Adds interest Leasing – Make monthly payments for a specified time period (1 year) – Must give the car back at the end of the leasing period

6. Buy or Lease? Benefits of Leasing Lease payments are usually lower than loan payments – In the short-run only Receive a new car frequently Benefits of Buying Cheaper in the long-run – Once the car is paid, it’s yours

7. Buy or Lease? Drawbacks of Leasing Mileage limits – If you go over them you have to pay extra Costly in the long run – You are always making car payments Drawbacks of Buying Cars depreciate value quickly – You may owe more than what the cars worth

8. Buying with a loan (financing) Shop around for the best interest rate – Dealers – Banks – Online credit businesses Down payment – Up front lump sum payment for the car – The bigger the down payment, the lower monthly payments and interest you’ll have to pay

9. Interest Rates You MUST consider both the interest rate AND the loan period – Loan Period = How long you will be paying for the loan – Low interest rates may be costlier over a longer period Ex. If you borrow $12,000 at a rate of… For…You’ll pay back $12,000 PLUS 4%36 months$754.36 4%48 months$1,005.53 4%60 months$1,259.88 5%36 months$947.43 5%48 months$1,264.88 5%60 months$1,587.33

10. Low APR or Rebate? Dealers will typically offer you a choice of a rebate (cash back) or a low APR (interest) rate – Which one do you choose? Use an internet calculator (edumunds.com) to find out which is better

11. Quick Review 1.When you decide to pay for a car in cash, how much do you have to pay up front? 2.How are leasing and financing (loan) payment options similar? 3.What advantages does leasing have over buying? 4.Why should you make a large down payment? 5.In what situation would you want to pay a higher interest rate? 100% You make monthly payments Cheaper in the short run, newer cars more frequently Less monthly payments, less interest costs If it cost less with a shorter loan period