1. Major Life Purchases
Buying a Car

2. Why Buy a Car? Freedom Transportation Increases your options:
Where you live
Where you work

3. What Does it Take to Buy a Car?
Research
Decision making skills
Negotiation skills
Patience
Requires knowledge of consumer rights
Maintenance Costs & Knowledge of how to maintain

4. Costs of Buying and Owning a Car
Buying a Car
Costs of operating a Car
Purchase price
Registration and Title
License (every year)
Sales Tax
Financing Costs
Depreciation (biggest cost)
Insurance
Accessories
Gas
Oil and other fluids
Tires
Maintenance and repairs (check owners manual)
Parking and Tolls
Think about all the costs involved in owning and maintaining a car. Look at your budget to determine what you can afford.
Initial purchase price
Registration and Title Costs (Title = ownership) There is a legal owner (loan) and registered owner.
License paid every year Costs of operating a Car
Sales Tax Gas – look for fuel efficiency
Financing costs – interest (3 year loan is best) Oil and other fluids
Depreciation – the decline in value due to wear and tear Tires
Insurance Maintenance and repairs – check owners manual
Accessories Parking and tolls
Depreciation is the biggest cost, Gas is second highest. Think about resale/trade in value. Also take into account mileage, mechanical condition, brand or style popularity, and color. A car will retain its value if it is well-maintained and fewer miles on it. Plan for unscheduled repairs too. Keep track of what is covered under the warranty and when that expires.

5. Budgeting for a Car Purchase
Know Your Budget
What are your fixed expenses?
How much can you afford for a vehicle?
Recommend no more than 10% of monthly income.
Down Payment or Trade- In?
Double-check your estimate by prequalifying for a loan at a:
Bank
Credit Union
Car is interchangeable for vehicle throughout the lecture.
Budget: A plan for spending and saving money during a particular period.
Down payment: Amount of your own money paid upfront for a vehicle.
Trade-in value: The value of the vehicle you are trading in for a newer or different vehicle.
© 2005 Consumer Jungle

6. Steps for Buying a Car
How to Get the Best Deal

7. Step 1: Research
© 2005 Consumer Jungle

8. Narrow Your Choices Identify Your needs and wants
Determine what you can afford
Questions to ask if deciding to spend your money
Do I really need this item?
Is it worth the time I spend making the money to buy it?
Is there a better use for my money right now?

9. Questions to decide on the right purchase.
What level of quality do I want?
What level of quality do I need?
What types of service and repairs does the dealer offer?
Should I wait until there is a sale on the type of car I want?
Should I buy a new or used car?
If I buy a used car, should I buy it from a dealer or from a private party?
Should I choose a car with a well-known name even if it costs more?
Do I know anyone who owns the type of car I want?
Are the warranty and the service contracts on the car comparable with warranties and service contracts on similar cars?
What do consumer magazines say about the type of car I want?

10. Decide whether to buy new or used.

11. New vs. Used How much is a new car worth 5 years from now?
Most Cars: % of the original value
Honda Accord or Toyota Camry: 60% of original value
Source: Kelly Blue Book
The first decision is to buy a new car or a used car.
© 2005 Consumer Jungle

12. This graph illustrates how quickly new cars depreciate over 3 years.
Depreciation: The steady decline in the resale value of any vehicle that you buy.
This graph illustrates how quickly new cars depreciate over 3 years.
© 2005 Consumer Jungle

13. A Big and Important Purchase
New Vehicle is the 2nd most expensive purchase in life.
1st is a home
A car is a long-term commitment
Average price:
New vehicle: $25,206.
Used vehicle: $15,568
Know the Basics
VIN, Manufacturer, Make, Model, Year, and Type
A Used vehicle may also be the 2nd most expensive purchase in life. $10,000 difference between the average new vehicle and used vehicle price.
The average price consumers paid for a new vehicle in June 2004 was $25,206, with new cars selling at an average of $22,537 and new trucks at $27,329.
The average price of a used vehicle in June 2004 was $15,568. Used cars sold for an average price of $13,973. Used trucks sold for an average of $17,454—up 4.2 percent.
Source: JD Powers & Associates
A car is a long-term commitment and which car a student buys is n important decision. The student should have a plan for how he or she is going to use the car now and in the future. Does he/she need a truck, a fuel-efficient commuter car, or a car with towing capacity?
© 2005 Consumer Jungle

14. Things that you will need to do your research

15. Vehicle Identification Number
VIN is a 17-character number
Where is it?
Left side of the dash
Inside of driver’s doorjamb
Vehicle’s title card
Information specific to the vehicle
Vehicle Identification Number (VIN): A 17-digit character number used to identify specific information about each car.
© 2005 Consumer Jungle

16. Manufacturer & Make
© 2005 Consumer Jungle
Manufacturer:: The company that builds the car. The manufacturer builds makes of cars.
Ford manufacturers Mercury and Lincoln cars.
General Motors manufacturers Pontiac, Buick, Cadillac, Oldsmobile, Hummer, Saturn, and Chevrolet cars.
Honda manufactures Acura cars.

17. Model Specific type of make The model year Taurus (Ford)
Accord (Honda)
Altima (Nissan)
Corrola (Toyota)
The model year
Not necessarily the year it was built
The date of manufacture is listed inside the driver’s door, on the vehicle certification label. This is the actual month and year that the vehicle rolled off the assembly line.
© 2005 Consumer Jungle

18. Type Pickups Sport Utility Vehicles Sport Utility Trucks Compact Cars
Mid-size Cars
Full-size Cars
Mini-vans
Full-size Vans
Sports Cars
© 2005 Consumer Jungle

19. Where to go to research

20. Sources to Compare Models Step 1: Research
The person who does their research always gets a good deal.
Online Sources:
Auto Manufacturers
Pricing sites
Consumer Reports
Fuel Economy sites
Safety sites
To accurately compare vehicles and determine the best one for your needs, you need to get as much information as you can about any models you’re considering. Fortunately, the Internet makes that easy to do. But, just as cars can vary greatly in quality, so can sources of information. The key is knowing what to look for and the best sources from which to get the information.
Research should be your #1 Priority.
© 2005 Consumer Jungle

21. Auto Manufacturer Websites Step 1: Research
Good for:
Basic Information
Models & Trim Levels
Retail Pricing
Warranties
Dealership Locations
Search of Certified Used Cars
Main purpose of auto sites is to promote their own vehicles.
Manufacturer Name
Website
Daimler Chrysler
Ford Motor Company
General Motors
Honda Motor Company
Hyundai Motor Company
Isuzu
Kia Motors America
Mitsubishi Motors
Toyota Motor Corporation
Volkswagen
The main purpose of auto sites is to promote their own vehicles, so the model information is the same as advertising.
© 2005 Consumer Jungle

22. Pricing Websites Step 1: Research
Good for:
New-Car Retail Prices
Used-Car Retail Prices
Dealer Invoices
Incentives
Other Pricing Variables
Name
Website
AutoTrader
Edmunds
IntelliChoice
Kelley Blue Book
National Automobile Dealership Association
VMR (used cars only)
© 2005 Consumer Jungle

23. Consumer Reports Step 1: Research
Vehicle Ratings
Model Reviews
Reliability Ratings
Fuel Economy
Safety Ratings
Subscribe online
1 month ($5) or 1 year ($26)
Last 4 years of data
Consumer Report’s Vehicle Ratings help you narrow you list of vehicles by giving you a quick look at how tested vehicles compare with their competitors in several areas. The Ratings charts show you which vehicles meet CRs stringent requirements to be recommended.
Consumer Report’s Model Reviews give you an in-depth perspective of a vehicle’s performance, comfort and convenience, and overall driving character, as well as insight into deficiencies that might not be apparent on a test drive.
Consumer Reports conducts the most comprehensive auto-test program of any U.S. publication or website. It differs from other reviewers in several significant ways:
They don’t accept advertising
They buy all of their own test vehicles
They conduct more than 50 individual tests and evaluations on each vehicle over several months and thousands of miles.
© 2005 Consumer Jungle

24. New & Used Car Buying Guides Step 1: Research
© 2005 Consumer Jungle
New & Used Car Buying Guides Step 1: Research
This is what the guides that Consumer Reports puts out looks like.

25. www.fueleconomy.gov Step 1: Research
Lists MPG for:
City, Highway, and combined
Compare MPG for 4 models side by side
Customize an annual fuel estimate based on the cost of gas in your area, and the percentage of highway to city driving.
© 2005 Consumer Jungle

26. Safety and Crash Tests Step 1: Research
Insurance Institute for Highway Safety
Tests and rates off-set frontal crashes:
Good
Acceptable
Marginal
Poor
National Highway Traffic Safety Administration
Tests and rates full-frontal & side impact crashes on a 5-star scale :
5-star rating is the safest(*****)
How well a vehicle protects its occupants from injury depends primarily on its structural design and safety systems. Safety belts are the single most important element, with air-bag systems providing additional protection. In addition, all vehicles have “crumple zones” in the front that are designed to collapse in a way that helps absorb the crash energy and minimize any deformation of the cabin. The better the vehicle manages this energy, the less chance that occupants will suffer serious injury. The only independent crash-test results are those from the National Highway Traffic Safety Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS). NHTSA conducts two types of crash tests: full frontal and side impact. NHTSA tests are a good indication of how well a vehicle’s safety belts and air bags protect the occupants in specific types of impacts. Each is scored on a five-star scale, with fewer stars indicating a greater likelihood of injury or death. Separate ratings are given in the frontal test for the driver and front passenger, and in the side impact for the driver and left rear passenger. The IIHS tests vehicles in an offset-frontal crash, the more common type of head-on crash. In an offset-crash test, only the portion of the vehicle in front of the driver impacts a barrier. This test challenges the car’s structural integrity and its ability to protect the area around the driver without collapsing. Vehicles are rated as Good, Acceptable, Marginal, or Poor.
Source: Consumer Reports
© 2005 Consumer Jungle

27. Cool Cars = Costly Repairs
Average Repair Bill is $3,912
Repairs Costs have increased 60% since 1992
2005 BMW 5 Series
Adaptive headlight $2,035
Parking Sensor $372
Adaptive Cruise Sensor $2,222
When considering the cost of a car, you also need to think about how much it is going to cost to replace items in the car. Expensive cars have expensive parts. The prices listed below are for parts only and does not include the cost of labor.
Average Repair Bill $3,912
Repairs Costs have increased 60% since 1992
Source: Highway Loss Data Institute
Examples include:
2004 Cadillac Escalade
Ultrasonic Rear Parking Assistant $924
Xenon Headlight $765
Heated Side Mirror $997
2005 BMW 5 Series
Adaptive headlight $2,035
Parking Sensor $372
Adaptive Cruise Sensor $2,222
Adaptive headlights change the amount of lighting on the road depending on driving conditions and position on the road using xenon lights.
Adaptive Cruise Sensor keeps a set amount of distance between your car and the car ahead of you when you have cruise control on.
Source: Weston, Liz Pulliam, “Cool Cars, Costly Repairs: High-tech cars means high priced repairs” CNBC, June 6, 2006.
© 2005 Consumer Jungle

28. Step 2: Check out the Cars

29. Where to Purchase a Car Step 2: Check out the cars
Dealerships
Take your Time: only look at 3 -4 cars a day.
If you are tired at the end of the day, and just want to get it over with, a salesman will be able to sell you anything.
Other Sources:
Private-Party Sellers
Internet
The following information will cover looking for a car at a dealership.
Always make sure you are doing business with someone that you would do business with for a long time.
Check with friends and family and see what they think of that business.
The Better Business Bureau (BBB) is a great source for checking the history of local business. Repair facilities, dealerships, banks with a bad reputation will have a history at the BBB.
© 2005 Consumer Jungle

30. Test Drive Normal Travel Routes Listen for noises
Drive variety of roads:
Windy
Bumpy
Steep
Drive for at least 10 minutes and 10 miles
Try stopping hard to make sure the brakes are in good condition. Make sure no one is behind you.
© 2005 Consumer Jungle

31. Types of Used Cars Program Factory Cars Certified Used Car
Fleet-leased (Rental) Cars that may have 10,000 miles on it but they are still under warranty.
Certified Used Car
Certified cars come with warranties
Must past inspection
Certified Used Car: A car that has passed through the dealer's mechanical and physical inspection.
© 2005 Consumer Jungle

32. Check out a Used Car Even if the car is a dealer-certified used car:
Get a Carfax report
Take the car to an independent mechanic for an unbiased, second opinion.
Cost: $50 - $70
ASC certified mechanics are best.
ASE Certified Mechanic: Automotive Service Excellence (ASE) is an impartial, third-party endorsement of a mechanic’s knowledge and experience.
© 2005 Consumer Jungle

33. Used Cars: Things to Check on the Exterior
Body Condition
Prior work will reveal paint and bolts
Glass
Paint
Rust or Damage
Tires
© 2005 Consumer Jungle

34. Used Cars: Things to Check While the Car is on the Floor Step 2: Check out the cars
Under Hood
Oil Leaks
Water Pump Play
Battery & Connections
Belts, Hoses & Clamps
Radiator & Coolant
Carburetor Air Filter
Engine Oil
Power Steering, Pump Oil
Safety Items
Lights
Horn
Windshield Wiper
Windshield Washer
© 2005 Consumer Jungle

35. Used Cars: Things to Check While the Car is on the Lift
Brake Fluid Leaks
Exhaust System
Engine & Transmission Leaks
Rear Axle Leak
Frame or Structure Damage
Suspension
Tie Rod Ends
Idler Arm
Shock Absorbers
Springs
Tires
Brakes (Front)
C.V. Boot

36. Step 3: Get a Pre-Approval

37. Step 3 – Get Pre-Approval
Know how much you can spend
Choose the best value
Shop for a car loan – the dealer is not usually the best place for financing.

38. Step 4: Make An Offer

39. Prepare to Deal Decide on your bottom line
Negotiate – avoid emotions/stick to facts
Avoid High-balls and Low-balls
Watch dealer add ons
negotiate your trade in first as a separate deal—then negotiate the car price.
Low-balling – offering an unrealistically low price for the car traded in
The salesman than acts like he is talked into a better trade-in
High- balling – offering an unrealistically high price for the trade in.
The salesman remembers that the manager must approve it-comes back and says the
manager did not approve and then tries to get you to buy a more expensive car that will
honor a higher trade in.
Watch dealer add-ons: high-profit, high priced serviced that add little value to the car. Examples are dealer prep, rustproofing, protective wax or polish, extended warranties.

40. Making an Offer Calculating a Reasonable Offer
© 2005 Consumer Jungle
Making an Offer
Calculating a
Reasonable Offer
Dealer Invoice Price
- Factory-to-Dealer Holdbacks
- Factory-to-Dealer Incentives
= Dealer Cost
Dealer Cost
x – 1.08
= Your Reasonable Offer
Armed with research, you can make a firm and reasonable offer to the dealer.
A reasonable offer is 2% - 8% above the dealer’s cost.
Get the price in writing.
The salesman will sale you the car at your reasonable offer with hopes that they’ll make more profit with the financing and extras.
Factory-to-Dealer Holdbacks: A percentage of the invoice on a day sales turn. It is usually 2-3% of the dealer invoice price that is refunded to the dealer after selling the car.
Factory-to-Dealer Incentives: A Bonus or reimbursement offered on a regional or national level that is refunded to the dealer after selling the car.
The best way to negotiate a vehicle's price is to have a starting price, say the CR Bottom Line Price plus 2-8% percent. The dealer has to make some profit on the transaction. The dealer pays for flooring which is the cost to finance the car.
To provide a better starting point for negotiations, Consumer Reports offers the CR Bottom Line Price, which factors in any rebates, holdbacks, or dealer incentives to give you a more realistic idea of how much profit the dealer is making on the vehicle.
To tailor the CR Bottom Line Price to a specific vehicle, figure in the dealer-invoice price for any options or packages in which you're interested (available as part of Consumer Reports' New Car Price Report) and add those to the Bottom Line Price. You have to purchase the CR New Car Price Reports. 3-month subscription for unlimited reports = $39.99 as of December 2005.
Once you have the price set, get it in writing. Remember. If it is not in writing, it is not true.

41. Work on Part 4 of your Life Portfolio
ENJOY YOUR NEW CAR!!!
Work on Part 4 of your Life Portfolio