1. BUYING & LEASING A CAR Unit Two—Budgeting Standard 4 Financial Literacy Mrs. Morrey

2. OBJECTIVE: List the costs and responsibilities associated with buying/leasing and owning a car.

3. COSTS OF OWNING A CAR  Car Payment  Do I want to buy NEW or USED?  What is the PURCHASE price of the car?  How much money can I afford to put down as a “DOWN PAYMENT”?  What are current INTEREST RATES on cars?  Taxes  Sales Tax  Sales Tax  6.85% (for every $1,000 you spend you will pay $68.50 in sales tax)  Vehicle Tax/Property Tax: Each year you own a car your are legally responsible to pay PROPERTY TAX on the vehicle.  Average PROPERTY TAX in Utah  $150.00  Vehicle Inspection  Periodic safety inspection to make sure the vehicle is safe to operate on the road.  Average cost in Utah  $45

4.  Gas  How much do you drive?  Average cost of gas?  Consider the gallons per mile of the car you want to purchase, can you afford gas for the car?  Automobile Insurance  Liability—covers damage to other driver’s car  Comprehensive—covers damages caused by something other than a collision (fire, flood, theft)  Collision—covers damages to your car caused by an accident  Bodily Injury—covers medical bills resulting from and automobile accident  Maintenance and Repairs  Oil change  Every 3,000 to 5,000 miles ($40)  General Maintenance  Tires, wiper blades, battery, etc. COSTS OF OWNING A CAR

5. HOW MUCH CAN I AFFORD?  Lump Sum Purchase  Paying for vehicle in cash—no monthly car payments  Financing  Obtaining a loan to purchase vehicle  Down Payment  Interest Rate  New car interest rates are generally LOWER than interest rates for used cars  Terms or Length of Loan  How long will it take to repay the loan—the SHORTER the BETTER!  Co-signer  If you do not qualify for a loan, someone can co-sign for you  Co-signer guarantees the loan  if you don’t pay, the co-signer is responsible to pay  NEVER BORROW MORE THAN 10% OF YOUR MONTHLY INCOME TO PURCHASE A VEHICLE

6. SHOULD I BUY A NEW OR USED CAR?  New Cars  More expensive  Documentation fees ($150-$400)  More reliable  Covered by warranties  Service contracts (oil change/routine maintenance)  Used Cars  Cheaper than purchasing a new car  Unknown vehicle history  Not covered by warranties  No service contract

7. LEASING A CAR  When you lease a car you do NOT own it, instead you enter into a long- term RENTAL AGREEMENT that allows you to use the car but you must return it when the lease ends, unless at that point you choose to buy it.  Advantages of Leasing  Because you are “renting”, leasing helps you get a car you may not otherwise be able to afford otherwise  Lower down payment requirements and lower overall payments  Leased cars are generally newer and will be covered by warranties  At the end of the lease you have the option to buy the car  Disadvantages  You are “renting” and you will never own the car  Limited in the number of miles you can put on a leased vehicle without having to pay penalties  Penalties for ending the lease early

8. VEHICLE WARRANTIES  As-Is (No Warranty)  If you buy a car and have problems with it, you must pay for any repairs yourself  Most used cars have an “As Is” warranty  Implied Warranty  Warranty that guarantees the car will do what it is designed to do, or what the seller promises it will do  Dealer Warranty  An obligation by the company selling certain goods to make repairs or replace such goods if they fail to function as promised.  Manufacturer Warranty  Covers virtually all parts, systems, and components of your vehicle for a pre-set amount of time or mileage. The most common arrangement is that the manufacturer will pay for the cost of all appropriate repairs and labor for up to 3 years or 36,000 miles, whichever comes first.