How People Get to Work

NEW CARS Advantages Reliability: New cars usually have fewer problems Warranty: May cover most repair costs New car smell !!!! Disadvantages Cost: Higher Depreciation: highest in first 2 years—20-25% in first year alone Loan payments may be high and last a long time

USED CARS Advantages Cost– less to buy Depreciation: Lower after first two years Disadvantages Reliability—may need repairs more often No warranty: usually sold “as is” Options-may not get what you want May not be “up to date” on accessories, safety, etc.

Costs of Ownership Don’t have a MONTHLY PAYMENT Mentality!! – Salespeople will always try to fit a PAYMENT to your monthly budget, but you NEED to figure the TOTAL COSTS: What are they??

Fuel Costs Estimated miles driven – DIVIDE by MPG of car to get – ESTIMATED GALLONS per year – Then MULTIPLY by price of GAS

Insurance Costs Before You Buy: – Call an agent for estimate based on your driving record, age, type of car, etc. Depreciation Consult Consumer Reports or vehicle pricing websites—check values of your car’s older model years

Financing Costs Total Cost: Monthly Payment X Term (in Months) Total Interest= TOTAL COST – (minus) Principal

Purchase vs. Lease Purchase/Own PRO – After last payment, you own it – No mileage limits CON – More maintenance costs – Unknown value in future Leasing Pro – Usually lower payments – Low maintenance/repair costs CON – Mileage limits – Extra $$ for wear and tear – Never gain EQUITY in car – May be more expensive in the long run Lessee Down Payment Title

Loan Balance vs. Depreciation Time=03 years $ Value Red= Book value of car Blue=Loan Balance When the Loan Balance exceeds the Book Value, you are said to be “upside down,” AKA: Negative Equity Later, when the Book Value exceeds the Loan Balance, you have Positive Equity

Vocab Terms Book Value Sticker (MSRP) price Dealer Invoice price Equity Rebate

Vehicle Costs of Ownership 1.Depreciation! 2.Gas/Fuel 3.Maintenance 4.Insurance 5.Financing (Interest!)

Vehicle Financing Three Variables: 1.Amount Financed (Principal) 2.Interest Rate (APR) 3.Length of Loan (Term) Determine Monthly payment and Total Cost Trick: “How much can you afford a month??” Borrowing for a longer term can lower your monthly payments, BUT!!! !!!Borrowing for a longer TERM at a lower interest rate can cost MORE than a shorter TERM loan at a higher rate!!!