CLP: How to Choose a Car

Can you Afford a Car? As a general rule, you can afford a car loan of no more than 20% of your take-home pay An average new car costs about $20,000 –Can you afford the average new car? –How much can you afford to spend a month on a car? Your total month’s income / 20%

How to Choose a Car-Class of Car? Economy Cars Midsize Cars Full-Size Cars Luxury Cars Sport Utility Vehicles Vans Sports Cars Pick-up Trucks

How to Choose a Car- Which Model? Features- the characteristics of a particular model of car that offers benefits to the owner Options- features that you can choose to include or not include on the car –Options add to the price of the car

Features and Options- Name some examples…. Air conditioning Sunroof Convertible top Cruise control Leather interior Power door locks and windows Sound system Dealer Add-Ons –Dealers offer options that they install in their own shops Rust proofing, special paint sealers, and upholstery stain resistant Extended Warranty –Basic warranty is 3 years/36,000 miles –Extended is 7 years/70,000 miles

Complete “Car Options and Their Prices”

Watch “How to Buy a Car”

New or Used? Considerations when buying a new car: –Cost –Mechanical Problems –Depreciation –Warranties –Insurance Costs

To Buy or Lease? Finance Options –More than 80% of the people who buy new cars in the US use credit to finance their purchase –It’s not lower interest rates, it’s convenient Rebates –A particular refund of the purchase price Low interest rates

Leasing Leasing is like renting Leasing was promoted as a way for people to buy the use of more expensive cars Today, more than 1/3 of new cars driven in the US are leased

How a Lease Works When a lease agreement is made, the manufacturer is paid for the car with money borrowed by the leasing business Payments made by consumers and the money received from the sale of the returned cars are used to repay this debt Consumers often do not realize it, but leasing a car is much like a loan –The only difference is that at the end of the agreement, they have nothing to show for their payments

Lease Terms Gross Capitalized Cost –The price you would pay for the car Capitalized Cost Reduction –The cash down payment Acquisition Fee –Payment to cover the cost of setting up a lease Residual Value –The predicted value the car will have at the end of the lease

Lease Terms Cont. Money Factor –An indication of the interest rate that you would pay for financing the lease of the car Monthly Payment –The amount you will pay each month during the lease Mileage Allowance –The number of miles you will be allowed to drive the car without paying an extra charger per mile Excess Wear Fee –Amount charged for damage to the car that is beyond that which could reasonably be expected Disposition Fee –Amount that is paid when the car is returned at the end of the lease

Steps to Leasing Step One- Negotiate the Price of the Car Step Two- Know the Residual Value –The value of the car after the term of the lease Step Three- Down Payment and Security Deposit Step Four- Financing Step Five- Before you Return your Lease Car –Find out and record it’s condition Step Six- Return your Lease Car

Who Should Consider a Lease? You should not lease a car if you can: –Can pay cash for the new car you want –Drive many miles each year –Keep your cars for many years –Are particularly hard on your cars You should lease a car if: –You can’t pay for new cars –You drive about 12,000 miles per year –You replace cars regularly

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