1. Cars & Housing FONTBONNE UNIVERSITY FINANCIAL LITERACY AND DEFAULT PREVENTION FACILITATED BY JAMES “VINNY” VINCENT ASSOCIATE DIRECTOR, FINANCIAL LITERACY LIAISON

2. YOU are in Control!  #1 Rule: “It’s my money so I decide where it goes.”  Things to consider:  Is a car a necessity?  Is public transportation an available alternative?  Can I carpool with coworkers or friends?  How much use will I really be getting out of the car?  Can I afford a car?  Car payments  Gas  Insurance  Maintenance

3. What Else You Need to Know  New vs. Used  CarFax report (www.carfax.com)www.carfax.com  Used: saves on price, but forfeit opportunity of warranty and condition of car may vary  New: more expensive, but warranty available and condition of car is higher  Regardless new or used, request to take car to personal mechanic for inspection  If dealership or owner refuse, walk away from the purchase (BIG RED FLAG!!!)  Warranties  Expressed: written warranties, often covering maintenance of car parts  Implied: required by Federal Trade Commission (new cars only), car must function for it’s intended purpose (i.e. driving)  Often overpriced, negotiate price with dealership

4. The Car-buying Process 1. Analyze Your Needs 2. Determine Affordability 3. Research Value 4. Negotiate Price Only 5. Negotiate Trade-In Only 6. Negotiate Financing Only NOTE: Steps 4-6 should always be done independently from each other. The salesman will try to discuss all three at the same time, saving them money. Remember, YOU ARE IN CONTROL. First settle on price, then settle on trade-in, and then settle on financing.

5. Analyzing Your Needs  How many people will be driving your car?  How much time will be spent commuting?  How much cargo space will you need?  Manual or automatic transmission?  How important is fuel economy to you?  How often will you have to park in tight spaces?  All-wheel drive or two-wheel drive?  How important is warranty coverage?

6. Determine Affordability Do you have room in your budget? Financing or Pay-in-full? Adjust budget to additional costs to owning a car

7. Research Value  EdmundsEdmunds.com  Nada.com  Cars.com  Consumerreports.org Invoice Price – Incentive – Holdback = True Dealer Price True Dealer Price + Fair Profit of 5% = Fair Price Offer

8. Shopping for Car Loans Check Credit Report Explore Bank Loans Explore Credit Unions Arm Yourself to Save Money Resolve any errors before stepping onto the car lot Get 2-3 bank offers for personal loans Consider credit unions when securing loan offers (often have lower rates) Take your offers to the dealership to leverage a better financing offer

9. The House-buying Process Step 1 Consult Net Worth Statement Step 2 Determine Your Needs Step 3 Obtain Financing Step 4 Evaluate Properties Step 5 Close the deal Follow the same process as car-buying; however, researching the true value of the properties will be even more important. A home is much more expensive than a car, and the risks are higher as well.

10. Mortgages Fixed-Rate Adjustable-Rate Hybrid Interest rate fixed for the life of the loan Recommended if not planning to relocate anytime soon Interest rate tied to specific major financial index which could vary Lenders tend to give a discount on the initial interest rate Combination of fixed and adjustable Fixed-rate for a set period of time and then becomes adjustable

11. Getting the Best Mortgage Possible Increase the size of the down payment Pay off debt and have a smaller down payment Make loan and debt payments on time Do not make large purchases, especially on credit Do not forget your money personality Take some of what you put away for a down payment and reduce or eliminate one or more debts. If debt isn’t the issue then perhaps it’s the size of your down payment. Consider saving a bit longer so you can increase your down payment. Taking on more debt lowers your credit score and you may not qualify for as much mortgage or the best rate as you would like. Pay on time. Your credit score and the banks will love you! Keep in mind your goals and how you like to spend your money. Avoid being house rich and cash poor.

12. Seminar Activity Please answer the following questions: 1. What is the difference between fixed-rate and adjustable-rate mortgages? 2. What is Rule #1 when buying a house or car? 3. True or False: Expressed warrantees are required by the Federal Trade Commission. 4. Name three reliable websites one should use when researching the value of a car. 5. It is better to: A. immediately resolve errors on your credit report B. fix errors after you have purchased your car 6. True or False: There is much larger risks involved when purchasing a house than a car. 7. True or False: Always talk about price, financing and trade-in possibilities collectively since it saves time. 8. Why is it recommended to not make big purchases on credit? 9. What are some considerations someone should take when analyzing their needs of a car?

13. Questions?  Contact James “Vinny” Vincent  jvincent@fontbonne.edu jvincent@fontbonne.edu  314.719.4353  Office Hours: Monday thru Friday (8:30am-4:30pm)  Lunch taken daily from 12:30pm – 1:30pm