MONEY WORKS FOR WOMENAT CURTIS MEMORIAL LIBRARY

BUYING YOUR FIRST CAR

STARTING YOUR SEARCH

What kind of car do I need? How many passengers will you typically

carry (size)? How often and how far you'll be driving

the car (gas mileage) Can you afford high maintenance costs

(old vs. newer; make or model that is common vs. specialized)?

New vs. used – warranty vs. cost

WHERE ARE THE CARS?

Car dealers – buying from a licensed dealer gives you a bit more assurance - warranty, help with paperwork, and Lemon Laws.

Private sale from an individual – can get a very good deals by buying a used vehicle from someone who has properly maintained the vehicle and is just looking to sell it, but there are risks! Usually “as is” sale.

Lessen the risks by getting a vehicle history report for it to find out if the vehicle is salvaged, has been in an accident, or has had odometer changes.

IF BUYING A USED CAR

Research the car first – Consumer Reports and others – see list of resources

Check out this guide from the Federal Trade Commission consumer protection division: http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut03.pdf

And one specific to Maine: http://www.maine.gov/sos/publications/usedcar.html

CHECK THESE OUT!!!!

THE BIGGEST QUESTION

How much can I afford?? Calculating the true cost of your car: Price of the car

Loan payment amount and for how long Price of making it legal: title, registration (at

your local town hall or DMV); tax; depends on value and age of car

Insurance Inspection once a year Gas on a regular basis depending on your

typical driving distances (VERY expensive now!); oil changes (usually every 3000-5000 miles), tires, batteries, etc.

FIGURING OUT THE $ STUFF

A good rule of thumb: buy a car that you can afford to pay off in 48 months (loan calculator coming up), AND can afford to put 20% down

If you cannot afford the 20% or 48 months, you should not buy that car. WHY? You never ever want to be in the position of owing more than your car is worth!

HOW MUCH CAN YOU AFFORD?

Start with monthly payment and work backwards to loan amount…

http://www2.myautoloan.com/loan-amount-calculator.html

INSTALLMENT LOANS

Money you borrow and repay:

In fixed monthly payments or installments

Over a set period of time, usually several years

Will include principal (the amount you borrowed) and interest (how the lender makes money)

TYPES OF INSTALLMENT LOANS

Secured loan: you offer collateral to the lender if the loan is not paid back as agreed

Collateral: an asset you own (e.g., your car) and give to the lender if you cannot repay the loan (Repo Men!)

Unsecured loan: not secured by collateral – unusual for a first loan

Will likely require co-signer (parent or other adult)

SOURCES OF LOANS

Banks

Car dealer

Parents?

Bad idea to use credit card! (very high interest rates)

INTEREST RATES DEPEND ON CREDIT

HISTORY

Example: Borrow $15,000 for 48 months

PAPERWORK

If buying from a dealer, they will take you through everything step by step, but pay attention and ask questions!

Private sale: the paperwork is up to you and the seller. 2 most important : Title – you MUST get this for cars ‘95 and newer, and

have it signed over to you (back of title); if you pay cash, bring title to MV, if you finance, bank will take title

Bill of Sale – documents the sale of the vehicle. Includes thorough contact information, vehicle information, and the selling price.

MORE PAPERWORK – TITLE AND REGISTRATION

Dealership purchase – all of the paperwork has been handled for you, and you'll probably need to make few, if any, trips to the DMV. You'll be given a temporary license plate to use until your permanent one arrives.

Private sale: Take all of your paperwork to your DMV to handle the titling and registration process.

Need proof of insurance before registering car!

REGISTER YOUR NEW CAR

In person at the Municipal Building. If Purchased from Dealer or Private Sale

Dealer Invoice or Bill of Sale (can be handwritten if used car)

Manufacturer's Window Sticker (if vehicle is new) Maine Sales Tax Form (available at Municipal Ctr) Maine Title Application (available at Municipal Ctr) Proof of Insurance (generally a valid insurance card) Vehicle Mileage from Odometer Reading Current Registration (if transferring plates from your

current vehicle) Previous Owner's Title and Lien Release (if purchased

in private sale)

REGISTER YOUR NEW CAR

Requirements if Previously Registered in Another State Title from state where last registered Registration from state where last registered Proof of insurance Odometer reading

Estates - If the vehicle is purchased or acquired from an estate, additional documentation is required. Please call ahead.

OH, YEAH, THE TAXES…

Sales tax of 5% - goes to state Excise tax – goes to town. This tax is based on the

list price when new (MSRP) and the current age of the vehicle. The tax is equal to $24.00 dollars per thousand on each dollar of the maker's list price for the 1st or current year of model, $17.50 per 1K for 2nd year, $13.50 per 1K for the 3rd year, $10 per 1K for the 4th year, $6.50 per 1K for the 5th year and $4.00 per 1K for the 6th and succeeding years. The minimum tax on a motor vehicle is $5.00.

WARRANTY

If buying from a dealer, the warranty will vary and depend on the car (new, used, etc.) – GET IT IN WRITING!!

Private sale – most individuals sell their vehicles "as is," meaning you're agreeing to purchase the vehicle in the condition it's in. In other words, once you pay for it, it's yours. If, however, you're buying from a seller who wants to offer you some sort of guarantee (not common!), make sure to get it in writing and notarized.

INSURANCE

The bad news (especially if you’re male): young and 1st time drivers are statistically a higher risk, so most insurers will charge a higher premium for this reason alone.

Ways to keep it lower: No luxury, flashy, big-engine cars NO TICKETS!!!! If your parents add you to theirs, this all still applies – THEIR

premium will go up accordingly BUT, they may get multi-car discount so your portion will be

smaller Some may offer good student discounts and most offer driver

ed discounts Compare prices online – many sites

BARRIERS TO GETTING THAT FIRST CAR

Lack of credit history is the biggest barrier, making it very difficult for young people to get a car loan

Some car salespeople will rake you over the coals if you are a first time car buyer – bring an experienced car buyer to the dealer with you!

Lenders typically won't approve car loans on used cars older than 5 years

Insurance rates for teens especially are very costly, often in the $5000 range (also for single males under the age of 25)