Money Management
Student Learning Objective Prioritize financial decisions by systematically considering alternatives and possible consequences
Public Transportation The use of public transportation saves energy and other resources. The use of public transportation may also yield cost savings. e.g. Price of the train or bus ticket Not on time Price of train ticket or bus fare is usually fixed
Transportation Choices Public Transportation Urban transportation Mass transit Commuter service
Transportation Choices Public Transportation Between cities Amtrak Bus
Private Transportation Car Bicycles Motorcycles Scooters
Transportation Choices Private Transportation Motorcycle / scooter
Transportation Choices Private Transportation Bicycle
Advantages of Cars Immeadiately Available Get to your destination in comfort
Disadvantages of Cars Purchase Price Maintenance Interest on the car loan Car Insurance Fuel Costs Registration Taxes
Transportation Choices Private Transportation Car / truck
> Private Transportation Buying a Car Narrow choice as to type of car
Private Transportation Buying a Car Narrow choice as to type of car Luxury / sports
Private Transportation Buying a Car Narrow choice as to type of car Luxury / sports SUV / pickup truck
Private Transportation Buying a Car Narrow choice as to type of car Luxury / sports SUV / pickup truck Full-size (not very popular; gas guzzlers)
Private Transportation Buying a Car Narrow choice as to type of car Luxury / sports SUV / pickup truck Full-size Mid-size
Private Transportation Buying a Car Narrow choice as to type of car Luxury / sports SUV / pickup truck Full-size Mid-size Compact / mini
Type of Cars Subcompact Compact Hybrid Electric Sport Cars SUV
Private Transportation Buying a Car Narrow choice as to type of car Luxury / sports SUV / pickup truck Full-size Mid-size Compact / mini Hybrid (gas / electric)
Used Car Used Car Lot Dealership CarMax Craigslist Newspaper Ads Rental Car Companies
Private Transportation Buying a Used Car Where to look Private owner (newspaper) New-car dealer Banks / finance (repo) Rental-car agency Used-car dealer Online
Private Transportation Buying a Car Estimate cost to buy car Purchase price Buying MY Car! Price $6,500
Private Transportation Buying a Car Estimate cost to buy car Purchase price Sales tax (most states) Buying MY Car! Price $6,500 Taxes (6%) $390
Private Transportation Buying a Car Estimate cost to buy car Purchase price Sales tax License / registration Buying MY Car! Price $6,500 Taxes (6%) $390 License / Reg. $125
Private Transportation Buying a Car Estimate cost to buy car Purchase price Sales tax License / registration Total borrowed Buying MY Car! Price $6,500 Taxes (6%) $390 License / Reg. $125 Subtotal $7,015
Private Transportation Buying a Car Estimate cost to buy car Purchase price Sales tax License / registration Total borrowed Finance charge Buying MY Car! Price $6,500 Taxes (6%) $390 License / Reg. $125 Subtotal $7,015 Finance (8.5%/3yrs) $596
Private Transportation Buying a Car Estimate cost to buy car Purchase price Sales tax License / registration Total borrowed Finance charge Total loan Buying MY Car! Price $6,500 Taxes (6%) $390 License / Reg. $125 Subtotal $7,015 Finance (8.5%/3yrs) $596 Total $7,611
Finance Costs Bank Credit Union Finance Company Dealership
Private Transportation Buying a New Car Financing a new car Loans (bank, credit union, finance company, or dealer) Length of loan Cosigner
Private Transportation Buying a Car Estimate cost to buy car Purchase price Sales tax License / registration Total borrowed Finance charge Total loan Monthly payment Buying MY Car! Price $6,500 Taxes (6%) $390 License / Reg. $125 Subtotal $7,015 Finance (8.5%/3yrs) $596 Total $7,972 Monthly pay. $211.42
Private Transportation Buying a Car Estimate cost to maintain car Monthly payment Buying MY Car! Monthly pay. $211.42
Auto Insurance Progressive Geico Allstate
Private Transportation Buying a Car Estimate cost to maintain car Monthly payment Insurance Buying MY Car! Monthly pay. $211.42 Insurance $175.12
Fuel Costs Type of gas required MPG
Private Transportation Buying a Car Estimate cost to maintain car Monthly payment Insurance Gas Buying MY Car! Monthly pay. $211.42 Insurance $175.12 Gas $175.00
Maintenance Costs New vs. Old Small Car vs. SUV Foreign or Domestic
Private Transportation Buying a Car Estimate cost to maintain car Monthly payment Insurance Gas Maintenance (oil, car wash, etc.) Buying MY Car! Monthly pay. $211.42 Insurance $175.12 Gas $175.00 Maintenance $25.00
Private Transportation Buying a Car Estimate cost to maintain car Monthly payment Insurance Gas Maintenance Monthly subtotal Buying MY Car! Monthly pay. $211.42 Insurance $175.12 Gas $175.00 Maintenance $25.00 Subtotal $586.54
Private Transportation Buying a Car Estimate cost to maintain car Monthly payment Insurance Gas Maintenance Monthly subtotal Emergencies (car repairs, etc.) Buying MY Car! Monthly pay. $211.42 Insurance $175.12 Gas $175.00 Maintenance $25.00 Subtotal $586.54 Emergencies $????
Which of the following costs of buying a car is not ongoing? Purchase price Insurance Gas Maintenance License / registration
Which of the following costs of buying a car is not ongoing? Purchase price Insurance Gas Maintenance License / registration
Private Transportation Buying a Used Car Shopping for a used car Blue Book Depreciation Warranty Used-Car Rule
Warranties New Car Used Car
Private Transportation Buying a New Car Warranty Extended “Lemon” laws
Private Transportation Buying a New Car Invoice / sticker price Never pay sticker Research pricing online at Edmunds.com Exception “ordering car”
Private Transportation Buying a New Car Trade-in NADA Kelley Blue Book Dealer will give you less, but less hassle
What do you think? Discussion Do you think it is better to trade your car in to the dealer or to sell it on your own? What kinds of problems are there with selling a used car on your own? Should you accept someone’s personal check for your car? Why? What should you look for when buying a used car? © EMC Publishing, LLC © EMC Publishing, LLC
Private Transportation Buying a Used Car What to look for Exterior Interior Test drive VIN report Mechanic evaluation Clear title
Leasing or Buying If you want to drive a newer car but do not have the necessary down payment to buy it, then you may decide to lease. If you plan to drive the same car for more than a few years, you will save money in the end by purchasing your car.
Advantages of Leasing You can drive a new or nearly new car with a lower down payment than if you purchased the same car Your payments are lower than if you purchase a car. You are not paying for the whole life of the car, just for the time of the lease period. Often the dealer will provide an excellent service package to be sure the car stays in good condition for resale at the end of your lease. At the end of the lease you just give back the car to the dealer.
Private Transportation Leasing a New Car Advantages of lease New car Payments usually lower Service included (usually) Many dealers quit leasing (Chrysler 2008)
Disadvantages of Leasing You do not own the car. At the end of the lease, you have nothing to show for the money you have paid. You may have to pay a security deposit and other fees at the beginning of the lease. If you drive more miles than specified in the lease, you will have to pay an extra fee. Your insurance costs might be greater because the dealer could require you to carry a higher level of coverage.
Private Transportation Leasing a New Car Disadvantages of lease Don’t own (no equity) Pay security deposit Limited mileage Insurance costs Always have car payment Can buy car at end of lease
Continued You will always have a car payment. People who buy a car and pay off the loan can drive for years without making any car payments. If you want to end the lease early, you will probably have to pay a significant penalty. You can buy the car at the end of the lease period, but you will pay much more than if you had purchased the car in the first place.
Links Consumer Reports NYT