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2 What is the leading cause of people experiencing debt and mismanaging money? Hosea 4:6

Deuteronomy 8:18 “But remember the Lord Your God, for it is He who Gives you the ability to produce wealth,…” 3 You have the ability to attain money…but it does you no good if you attain it and have no knowledge of how to manage it.

4 This is what happens to your money when you don’t know how to manage it.

Financial literacy is the ability to make informed judgments and to make effective decisions regarding the use and management of money. 5

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The Big Decision 7

The Big Decision Cont’d The 1 st and one of the most expensive choices you will make. 8 Buying a car will most like be…

9 5 Questions to ask yourself before you buy a car…

SizeAdvantagesDisadvantages Small 4 passengers Excellent fuel economy Low Depreciation Best maneuverability Low upkeep cost Limited passenger & trunk space Vulnerable to accidents Rough ride Compact 5 passengers Good fuel economy Good maneuverability Moderate upkeep cost More passenger & trunk room May depreciate more than small car Vulnerable in accidents Rougher ride than a larger car Midsize 6 passengers Maneuverability Fuel economy Smooth ride Enough room for family Generous trunk space Higher initial cost Higher upkeep cost Fuel economy not as good as smaller car Large 6 passengers Good Highway performance Good passenger &trunk space Most collision protection Heavy towing capability Poor fuel economy Highest initial cost Highest upkeep cost Highest depreciation Highest insurance rates 10 What are the Pro’s and Con’s for the Car I want?

Cost of the car, which include: Initial price of the car Cost of financing Registration fee Taxes Insurance Gas Oil Maintenance & repairs Parking fees Tolls Depreciation of car 11 More Things to Consider…

Installment charge or the carrying charge – includes interest On the money being borrowed & the handling fee for extra paperwork Financing – arranging to make equal monthly payments or installments for a certain period of time usually months Car loan – when you don’t have enough money to get the car, a car loan is attained through a bank or through the car dealer Do not sign any contract until you have read and understood it completely. Be sure that the car you are buying is correct, the total cost, installment Charge, annual rate of interest, and number of payments is listed. Check for Any hidden charges! Remember that after you have signed any contract IT IS LEGALLY BINDING! 12

One of the major costs of owning a car is depreciation. When you first drive your car off the car lot it has depreciated in value. Average annual depreciation = total depreciation years car owned Jake Williams paid $18, 300 for his car 3 years ago. The Car is worth $12,540 now. What is the average annual depreciation? $18,300 Original Cost -12,540 Present Value $5,760Total Depreciation To find the total depreciation, subtract the Present value from the original cost To find the average annual depreciation, divide the total depreciation by the number of years the car has been owned. $1,920 Avg. annual depreciation 3 $5, Depreciation

14 Having Insurance is a must!!! Here is what you pay if you don’t have insurance: Fine of up $1000 Car automatically gets impounded Mandatory day license suspension TYPES Liability – covers the financial responsibility of a driver if his car should cause death or injury to another person Collision – pays for the cost of repairs in an accident which is your fault. If you only have liability and the accident is your fault the insurance company will pay for the other car…leaving the damage to your car up to you Comprehensive – covers losses not related to traffic accidents such as theft, vandalism, falling objects, flood etc. Factors that affect insurance: Age, Gender, Drivers safety record, type of car Insurance

15 Good Grades are great for insurance! Maintaining a ‘B’ average gets you a 25% reduction in the cost of the policy! Because William Ferguson is a teenager, he pays $1020 per year for liability insurance. If he maintains a ’B’ average he receives a 25% reduction in the cost of the policy. What is the cost of the reduced premium? 25% of $1,020 =.25 x $1,020 = $255 $ $765 is the new cost Insurance

16 Automobiles are made to have an average road life of roughly about 100,000 miles, but the actual life of a car depends on how well you take care of the car. Repair or Replace List Oil change – every 3,000 miles or every 3 months Brakes relined - every 15,000 to 25,000 miles Shock absorbers, mufflers, tires – 15, 000 to 50, 000 miles Tires – 15,000 to 50,000 miles (depends on how good the tire is) Replace: Parts such as the water and fuel pumps, starter, generator, carburetor, thermometer, & spark plugs will occasionally need to be replaced. Trunk Essentials Adjustable Wrench Pliers Flares Screwdriver Jumper Cables Spare Tire, Jack Flashlight Tire Pressure Gauge Work Gloves Work gloves, Blanket Maintenance & Repair

17 Remember the cost of a car is not just the selling price. To Know if you can afford a car, you need to figure the annual operating cost which includes the sum of all annual expenses. Model Problem Darriel Johnson has a car that originally cost $18,000. Her annual depreciation rate is 13%, and she pays 7% interest on the original cost of the car. Her annual expenses for repairs, gas, oil, maintenance, fees, and insurance are $1,600. What is her annual operating cost? 13% of 18,000 = $2340 Depreciation 7% of $18,000 = $1,260 Interest charge + $1,600 +Repairs, gas, insur. Etc. $5,200 = Annual Operating Cost Annual Operating Cost

18 Some Individuals or businesses prefer to lease. A lease is a contract arrangement from 1-4 years during which monthly payments are made. As many as one in five new cars are leased rather than bought. Just because leasing is popular… does not make it a smart deal! There are two types of leases: Open-end and Closed-end Open-end lease is a rare lease in which the person whom the car is leased must purchase the car if it depreciates more than expected. (These should be avoided) Closed-end lease is a lease in which the car is simply returned at the end of the lease agreement. Length of Lease Small Car (per month) Compact (per month) Midsize (per month) Large (per month) One year$249$319$399$469 Two years$219$289$359$409 Three years$199$259$309$369 Leasing Closed End Lease Pricing

19 The amount of monthly payment depends on the following: The kind of car leased The length of the lease Which party is responsible for maintenance, repair, & insurance The person leasing the car can be charged extra at the termination of the lease if the car was not properly maintained or if the agreed mileage was exceeded. You end up spending more money driving and repairing a car that you won’t own! The money you spent leasing…you could’ve saved or purchased a new or certified used vehicle. Why Leasing is Not The Best Option