© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Making Automobile and Housing Decisions #5

Buying an Automobile Research thoroughly Select car based on needs Negotiate price –Arrange favorable financing –Understand terms of sale before purchase Maintain and repair after purchase

Choosing a Car Factors to Consider: Affordability Operating costs Gas, diesel, or hybrid New, used, or “nearly new” Size, body style, and features

Choosing a Car Other Considerations Trading in or selling present car Fuel economy Safety features Don’t forget about insurance costs!

The Purchase Transaction Negotiating price –Sticker price versus dealer’s cost Closing the deal

Leasing A Car Leasing usually offers: Lower monthly payments More expensive car for same payments Lower down payment When leasing a car, you pay for its use during a specified period of time At the end of lease, you have nothing

The Leasing Process Closed-end lease “walk away” from car when lease is over most popular Open-end lease payment based on car’s residual value upon return, pay difference if car’s worth is less than estimated

Leasing a Car Lease Payment Calculation Based on 4 Variables 1. Capitalized cost (price) of the car 2. Forecasted residual value at end of lease 3. Money factor (financing rate) on lease 4. Lease term

Lease versus Purchase Analysis More or less costly to lease? When the lease ends –Return the car? –Buy the car?

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Protecting Your Property #10

Types of Automobile Insurance Coverage Part A – Liability coverage Part B – Medical Payments coverage Part C – Uninsured motorists coverage Part D – Coverage for damage to your vehicle

Part A: Liability Coverage Required in most states Pays injury and property damages to others when you are responsible for the loss Covers costs of settling or defending claims for damages

Part A: Liability Coverage Required in most states Pays injury and property damages to others when you are responsible for the loss Covers costs of settling or defending claims for damages

Part A: Policy Limits Insurance company may limit total damages paid for any one accident –Typical limits are $50,000, $100,000, $300,000 and $500,000 Some insurers split the limits of liability coverage available

Four Parts of a PAP

Part A: Persons Insured Insured Person the named insured family members any person using covered auto any person or organization responsible for insured’s actions Covered Auto listed on declaration page acquired during policy period any vehicle temporarily used while auto is being repaired

Reimbursement for medical expenses resulting from an accident Covers insured, family members, and passengers in covered autos Covers injuries sustained as a pedestrian or while riding a bicycle Part B: Medical Payments

Pays when other driver has no insurance or if hit-and-run Usually pays for bodily injuries, not property damage Additional coverage available to protect against underinsured motorists Must meet criteria: Another driver at fault Other motorist uninsured Damages were incurred Part C: Uninsured Motorists

Part D: Physical Damage to a Vehicle Collision Pays the actual cash value of the damage minus deductibles Pays no matter who is at fault Required for financed cars to protect the investment

Protects against loss to insured auto caused by perils other than collision –hail, fire, theft, falling objects Comprehensive Part D: Physical Damage to a Vehicle

Reimburses parties involved in an accident without regard to negligence Each party compensated by their own insurance company Restricts remedies and payments for pain and suffering State laws vary regarding amount of no- fault benefits and restrictions for legal actions No-Fault Automobile Insurance

Factors Affecting Premiums Rating territory Use of automobile Driver’s personal characteristics Type of automobile Driving record

Financial Responsibility Laws Require motorists to buy a minimum amount of auto liability insurance Compulsory auto insurance laws require proof of insurance when acquiring license plates Others require proof of coverage after an accident