1. Buying and Owning a Vehicle and Insurance
Chapter 17/13.5
Buying and Owning a Vehicle and Insurance

2. For Your Quiz You should be able to explain the following:
List and explain the different types of insurance coverages available
List the three types of insurance required by the State of Illinois for driving
List the factors used in determining your insurance premiums
Define premium
Define deductible
List and explain the four major expenses involved in purchasing a vehicle

3. Buying a Vehicle Can you afford it? Consider: Purchase Price
Depreciation
Financing
Other Costs
Purchase Price: What you are charged for the vehicle. Shop around and find out prices before determining what type/make of car you want to know if it is in your price range.
Depreciation: Value of the car will drop over time. Will drop whether you use it a little or a lot. Some makes and models drop faster than others, you should research this before you buy.
Financing: This is when you have to obtain a loan to purchase your vehicle. Shop around for the best loan available before you commit to the car. Banks, credit unions, and other private money lenders tend to have better rates most of the time compared to the car dealer. Very common way to buy a car but because of interest you end up paying more for the car than someone who pays outright for it with cash.
Other Costs: Fuel, Oil, Tires, Repairs, Replacement parts, Licensing, Registration, Insurance, Taxes on purchase, Interest on Loans also need to be considered. May also include tolls (IPASS) and parking fees/parking pass.

4. Other things to consider
Vehicle Size
Engine Size and Types
Transmission
Optional Equipment
Vehicle size: What is it going to be used for? How many passengers are you going to have?
Smaller - Usually has better MPG, but less protection in collision. Easier to maneuver.
Larger – more comfortable ride, but more costly to operate. Larger carrying capacity.
Engine Type Size – Smaller engines are more fuel efficient, but generally have less acceleration power. Cars that are fully loaded (power everything) generally perform better w/ larger engines. Larger engines usually cost more to maintain and repair.
Transmission – Most vehicles come in automatic now. Most are almost as fuel efficient as manual transmission cars now. Automatic cost more to repair, but manuals tend to need to be repaired more often.
Optional Equipment – Power windows, door locks, safety features that may not be standard, satellite navigation, DVD player, upgraded stereo systems, etc. all increase the cost of your vehicle. An insurance agent can tell you what safety features may help you save money on your premiums as well.

5. Leasing a Vehicle Leasing Things to consider:
Contract length and terms
End of lease options
Return and lease
Purchase
Return with no obligations
Leasing – an alternate way to purchase a vehicle. Still responsible for monthly payments, fuel, and all other operating costs.
Contract terms and length – only keep the vehicle for a certain time period, usually three years, Usually limit the number of miles you can put on vehicle during term of contract otherwise penalties are charged, likewise excessive wear-and-tear on the vehicle will cost you more.
At the end of the lease you can return the vehicle and lease another, purchase the vehicle you leased based on the original amount less the difference already paid, or you can return the vehicle and go buy a different vehicle, lease a different vehicle, or have nothing to do with that dealer any more.

6. Buying a Used Vehicle Private vs. Dealer How much should you pay?
NADA Bluebook
Kelley Bluebook
Choosing a vehicle
CARFAX
Vehicle “Walk-around”
Test Drive
Closing the Deal
Private owner will seldom repair vehicle or provide warranty (guarantee of money back if it breaks).
Private sales are final.
Used car dealers have a larger selection and may provide warranties, but read warranty so you know what is covered.
NADA blue book of Kelley bluebook are two good starting points, but many websites available now to do research before you buy. Make sure you have consider make, model, and additional sources of value (upgrades, packages, etc.). These will give you a ballpark figure of what it may cost your.
If you have a car in mind, you can also research the vehicles history to see if there have been any major repairs done to it by going to CARFAX (carfacts.com). All you need is the vehicle identification number (VIN number).
Before choosing a vehicle ask if you can have your mechanic (if you have one) check it over, determine if any repairs are needed, talk to owner about condition of vehicle whenever possible.
Walk-around – Check all doors/locks to make sure they work. Check for leaks under/around car. Check for signs of repair work. Check inside for comfort and condition, odometer for mileage, lights and accessories, pedals and steering. Make sure spare tire and jack are present. Open hood and check engine, hoses, belts, fluid levels, battery and cable condition.
Test drive – If owner refuses test drive, they are probably trying to hide something. How does it handle? Any odd noises? Do brakes work well? Is steering good? Check warning lights on start-up, turn signal, headlights, heat/AC and other accessories.
Closing the deal – If seller is going to make repairs have that written into the sales agreement. A written contract can help you get money back if car is a “lemon.” Make sure owner’s manual is with the car. Registration slip/Title needs to be signed by the seller and buyer.

7. Car Insurance Terms to know: Financial Responsibility Laws Premium
Deductible
Financial Responsibility Laws – Law requires you to prove you can pay for damages you cause that result in death, injury, or property damage.
Premium – a specific amount of money paid for coverage over a specified amount of time. Typically 6 months, but can vary.
Deductible – an agreed upon amount of money that you pay “out of pocket” before the insurance company pays money towards the damages. The higher your deductible (more you are willing to pay) the lower your premium will be and vice versa.

8. Types of Car Insurance Liability Insurance
Bodily Injury Liability Insurance
Property Damage Liability Insurance
Uninsured Motorist/Underinsured Motorist Insurance
Collision Insurance
Comprehensive Insurance
Medical Payments Insurance
Towing Insurance
Rental Insurance
Bodily Injury Liability Insurance – Pays claim against the owner if someone is killed or injured and owner is at fault. Pays for hospital bills, funeral expenses, lost wages, and legal/court fees. Required by the State of Illinois.
Property Damage Liability Insurance – Pays claim against the owner if property of others is damaged and the owner is at fault. Pays for other car and possessions in car. Damage to telephone poles, trees, mailboxes, houses, etc. Required by the State of Illinois.
Uninsured Motorist/Underinsured Motorist Insurance – Pays for injuries to you and your passengers in case of hit-and-run collision, uninsured or underinsured motorist. Pays for hospital bills, funeral expenses, legal fees, court costs, and lost wages for you and your passengers. DOES NOT COVER PROPERTY DAMAGED IN COLLISION!!! Required by the State of Illinois.
Collision Insurance – Pays for cost of repairing/replacing owner’s vehicle when owner is at fault or when owner cannot collect from person at fault. Pays for repair/replacement of any car driven by owner or with owner’s permission. Important for new car. Can drop after 7-10 year because of depreciation.
Comprehensive Insurance – Pays for the cost of repairing/replacing the owner’s vehicle. Natural Disasters, vandalism, theft, riots, “Acts of God.” Important for new car. Can drop after 7-10 year because of depreciation.
Medical Payments Insurance – Pays for medical costs for you and your passengers injured is any collision, regardless of fault. Pays for any immediate medical costs (generally in addition to any other medical insurance).
Towing Insurance – Pays for the cost of a tow, battery jump, or minor damage that results from a tow. Also covers service for flat tire or out of gas call. Not necessary with some warranties that are available.
Rental Insurance – Pays for the cost of a rental vehicle while your is being repaired/replaced. Does not insure the rental vehicle itself.

9. How do they determine your rates?
Based on statistics
Look at the following categories:
Driving Record
Age
Miles Driven
Driver Gender
Marital Status
Type of Vehicle
Where You Live and Drive
Driver’s Claim Record
Driving Record – How many convictions and collisions have you had? They greater the number, the more you pay.
Age – Younger drivers pay more because statistically your age group is involved in more collisions.
Miles Driven – The more miles you drive in a year the more exposed you are to collisions.
Driver Gender – Historically males drive more and are therefore involved in more collisions and traffic stops. Who drives more mom or dad? Women in the past did not drive as much which explained the discrepancy, but with more women drivers (soccer moms, women in the work force, etc.) the gap is narrowing and eventually you may not see any difference between males and females.
Marital Status – Statistically speaking married people are involved in less collisions than single people. Why? Protecting family members, looking out for others, not wanting to face the partner with bad news, etc.
Type of Vehicle – The more likely your vehicle is to cause damage in a collision, the more power it has, the color, engine type, etc. all play into this. Safety features, anti-theft devices, etc. also have a role in this in lowering your costs.
Where You Live and Drive – The larger the population in your area the more at risk you are of being involved in a collision.
Driver’s Claim Record – How many times have you gone to insurance company asking for $$? The more you go the more you pay. Ideal customer is a person who pays on time and never makes claim.

10. Ways to reduce your premiums
Good Student Discount
Good Driver Discount
Multiple Policies
Safety Features/Anti-Theft Devices
Good Student Discount – by maintaining a certain GPA determined by your insurance company, you are able to receive a reduction in your premium. This is usually good through college age students.
Good Driver Discount – no claims or convictions over a certain time period as determined by your insurance company (usually 3 years).
Multiple Policies – Multiple policies with the same company. They get more business you get a slight discount (multiple cars, home, boats, personal watercraft, motorcycles, etc.).
Safety Features and Anti-Theft Devices – Items that are not standard in your car, but that you opted to have installed. Items that will help protect you in a collision or help recover your vehicle if it is stolen. Additional airbags, rear view camera, lo-jack, on-star, etc.

11. Example costs for teen insurance Car – Pontiac Grand Am 6 cylinder, 4 door Full Coverages: $500 deductible Liability Limits: 100/300/100 Parents = $ every 6 months
Daughter:
Part time = $526.00
PT Good Student = $475.00
Full Time = $731.00
FT GS = $660.00
FT GS 1st ticket = $685.00
FT GS 1st ticket, 1 collision = $1,064.00
FT GS 2nd ticket, 1 collision = $1,233.00
Son:
Part time = $736.00
PT Good Student = $592.00
Full Time = $1,096.00
FT GS = $880.00
FT GS 1st ticket = $912.00
FT GS 1st ticket, 1 collision = $1,417.00
FT GS 2nd ticket, 1 collision = $1,640.00