Money Counts A Financial Literacy Series Car Shopping

Money. Counts: A Financial Literacy Series Car Shopping 11 -A Grange Building University Park, PA 16802 financialliteracy. psu. edu finlit@psu. edu 814 -863 -0214

• As most consumers, your decision to buy a house or a car might be the most expensive purchase you make in a lifetime. Description • You can purchase such an important asset in one of two ways: Buy what you LOVE and then struggle to make the payments, OR Think RATIONALLY and logically before you sign on the dotted line.

• Learn how to decide on the right purchase Learning Outcome • Understand how to shop for a car loan • Calculate car owning cost and operating cost • Understand auto insurance coverage • Understand warranties and extended warranties

Making the decision Buy the car you love! You can make payments later! OR Think rationally and logically before you buy a car!

Basis of decision – Budget Cost of operating a car Cost of owning a car

Purchasing decision Cosigner? Lease or Buy? Where to finance? How to pay? Saving for down payment? Purchasing decision How long? Budget? 20/10 rule? Total affordable cost?

If you buy a NEW car • Customization • New • Warranties & service contracts • Newer technology & gizmos • Environmentally friendly If you buy a USED car • More reasonable price • Lower taxes & fees • Better insurance rate

STOP! First things first! • Before shopping for a car loan • Check your FICO score • Clean your credit report as necessary • Pay off all credit cards debts

Key terminology APR Length of loan Monthly payment Total cost of loan Total finance charge

Terms of payment ger n o l e h T f o s m r te t paymen re The mo t interes you will pay The hig her down payme nt CAR LOAN The low total co er st of loan

Truth-in-lending Act of 1968 • Informed use of consumer credit • Required disclosures • Terms and cost associated with borrowing process are calculated Lemon Laws • Protects buyers of new vehicles from getting defective vehicles • Each State has its own perimeters of Lemon Laws

Prepare for the buying process 1. Know the difference between invoice price and MSRP 2. Check the website for rebate, and make sure receive all applicable rebates 3. Research the dealer 4. Wait 24 hours before you buy 5. Check your FICO score 6. Get your own financing if you find a cheaper interest rate 7. Compare multiple dealers 8. Buy at the critical time 9. Resist and be strong 10. Use this checklist

Auto insurance coverage Rental reimbursement Bodily injury liability Collision Personal injury protection Uninsured motorist Towing & labor Medical payments Property damage liability Comprehensive

How insurance rate is calculated? Age, sex, marital status, personal habits (smoking, drinking, etc. ) Driving record deductible and discount for additional driving training Type, value, and age of the car Insurance Rate Type and frequency of use of vehicle (how far do you drive to work, etc. ) Location and state

Warranties and extended warranties As is Extended Implied Warranty Manufacturer Dealer

Evaluating cost vs. benefit Additional Benefits Cost

Evaluating cost vs. benefit Is the additional cost worth the additional benefit? How much is the additional cost? What does it cover? Does the initial warranty cover such repairs? Do you have to use the dealer for such repairs? Can you use your preferred mechanic? Can you cancel and get refunded a portion at a later date? Does it require a deductible? Does it save you money if such a repair is needed?

Money. Counts: A Financial Literacy Series Comments and questions 11 A Grange Building University Park, PA 16802 financialliteracy. psu. edu finlit@psu. edu 814 -863 -0214