1. The Car Deal Package Take notes Be sure to include all vocabulary
Ask questions for clarification

2. Which car would you like to buy? Why?
There are many factors to consider. Price, monthly payment, etc
Estimated price:
Economy car $17K
Moderately priced $24K
Luxury car $55K
Now, think about how you would pay for the car you chose… Most people have to finance their car purchase, and do so at dealership

3. Financing Using credit to buy something
Contract: an exchange, promise or agreement between parties that is enforceable by law
Under terms of a financing contract: a car buyer agrees to pay the amount financed, at an agreed-upon interest rate for the length of the contract.
One advantage of dealer financing is that the dealership may offer promotions and incentives from manufacturer

4. Your income Dealership will look at your net pay. What is net pay?
Generally, a vehicle payment should be no more than 20% of a car-buyer’s net pay after first subtracting other monthly payments

5. Lets consider those 3 cars
8% interest rate
48 months
Estimated monthly payment
$415 for the economy car ($17K sale price)
$586 for the moderately priced car ($24K sale price)
$1343 for the luxury car ($55K sale price)

6. So lets calculate the monthly net pay needed for each of these cars using 20%
Economy If $415 = 20%, then 100% is $2075. My net pay, after all other monthly payments would need to be $2,075 for this to be a sound commitment.
For Moderately priced car, $2,930
For Luxury car, $6,715

7. Complex decision-making process
Can you afford the car?
Estimating all other expenses – can you afford those?
Will you be “living within your means?
Living within means = keeping expenses below income

8. Opportunity Cost
Highest-valued alternative given up when a choice is made.
What are some opportunity costs of buying a car?
Could be saving money
Could be paying off other debt
Could be shopping and eating out more

9. Secured Loans
Secured loan: a loan that is backed with collateral. The lender requires and the borrower offers property as a guarantee of repayment.
Car loans are secured loans, so interest rate is generally lower.
Collateral for the car loan is the car. The finance company holds a lien on the vehicle until it has been paid in full.
Lien: legal right to take or sell property as security for a debt. The lender can repossess the car if the borrower does not make the payments, and the creditor (the lender) can sell the vehicle to apply the proceeds from the sale to the outstanding balance on the loan.
If the vehicle is sold for less, the consumer is responsible for the difference

10. Complex Decision making process
Interest rate?
Amount to borrow?
Term of contract?
10% of $1,000 for a year is .10 X $1,000 = $100
5% of $1,000 for a year is .05 X $1,000 - $50
The more you borrow, the more you pay. The higher the interest rate, the more you pay. The longer the term, the more you pay.

11. Examine your Car Deal Package
Complete all 4.1, 4.2, 4.3
What are some advantages and disadvantages of a longer-term contract?
What are some advantages and disadvantages of making a down payment?
Why is it important to consider the income test (20%) when choosing a car?
Watch clip

12. Last class we chose a car deal package
Buyer Beware: The consumer is responsible for knowing and understanding the terms of the agreement in car contract
Living within your means: keep your expenses below your income

13. Review 4.4 – Car Contract and Security Agreement
Truth in Lending Act: a federal law that requires disclosure of information about the cost of credit. Fiance charges and APR mst be displayed prominently on forms and statements used by creditors.
What is the APR?
How much was put down?
How much is being financed?
What is the finance charge?

14. Interest rates vary Secured loans USUALLY have lower interest rate
Some will be charged higher interest because they are riskier – based on credit report, etc

15. In partners do 4.5 – It’s in the contract

16. Go to bankrate.com to evaluate 4 Deals
Complete 4.6

17. Review What is difference between gross pay and net pay?
What is interest?
What is collateral?
What is a lien?
What is opportunity cost?
What is principal?
What is a secured loan?
What is Truth in Lending Act?

18. Make a sale
Using your Deal given, make an advertisement and a pitch.

19. As each group presents jot down
One advantage
One disadvantage

20. Take a vote – what deal would class take?

21. Now look at actual numbers - 4.9 Special Deals
Complete chart.
Which looks best now?
Is it the same choice the class picked?