Date post: | 11-Jan-2016 |
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Transportation and Buying A Car
CONSUMER ED
Overview Transportation is
considered a basic need. Get to work, get to
school, go shopping, etc.
Depending on your (and your family's) needs, your mode of transportation may vary.
Transportation Options
1. Public Transportation2. Car Share/ Rental3. Leasing a Car4. Buying a Used Car5. Buying a New Car
Public Transportation
Pros Cheapest option Environmentally
friendly May be faster at
certain times (rush hour)
Don’t have to worry about parking
Cons Not as flexible as
car ownership Lack of
convenience Dealing with
weather extremes
Difficult to transport “stuff”
Car Share/ Rental
Some people rely on public transportation for day-to-day transportation, then rent a car as needed for grocery shopping, out of town travel, or moving “stuff.”
Car shares, such as Zip Car or iGo, allow people to rent cars by the hour or day for a monthly fee.
Leasing a Car
Leasing a car is the same as renting a car.
You make a small down payment, and pay a monthly fee.
You don’t actually take out a loan.
You may choose to buy the car at the end of the lease.
Pros
Less $ up front
Cheaper monthly payment/ nicer car
Cons
You don’t actually own the car.
Mileage fees
Excess wear fee
If you buy, ends up being more expensive.
Pay for insurance, gas, registration, etc.
Buying a Car: New or Used
New Pros
That “new car” feeling
Warranty (50,000 miles)
Reliability
Cons Highest price ($15,000
and up)
Loses value ($2,000+) and becomes a used car the second you buy the car.
Pay for insurance, gas, registration, etc.
Used Pros
Cheaper
Get a decent car for a decent price
Smaller down payment/ less money owed
Cons
Unreliable aka “a lemon”
May pay more for repairs/ not under warranty
Pay for insurance, gas, registration, etc.
The Car Buying Process
1. Decide on the right car for you
2. Visit a dealership
3. Compare prices
4. Test drive
5. Negotiate a price (if applicable)
6. Determine financing options
7. Drive home in your new car!
Car Loans
Once you’ve decided on your car, now you actually have to buy it!
If you saved up and can pay cash for your car……AWESOME!
However, most people need to take a car loan.
Borrow $ from a bank and pay the $ back over time….with interest!
How A Car Loan Works (Financing)
Start with your down payment. This is the amount of $ you have saved up and will pay towards the car TODAY.
The larger your down payment, the less you’ll have to borrow, and the less interest you’ll have to pay.
You will finance the remaining amount, borrowing that $ from a bank and paying it back over time (usually 3,4, or 5 years) Of course, any time you borrow $ you have to pay
________________________!
Example Example:
Car costs $10,000 You make a $2,000 DOWN PAYMENT You borrow $8,000 from a bank and pay it back over the course
of 3, 4, or 5 years. Longer payback period means lower monthly payments but
more interest over time.
$8,000 @ 4% over 3 years= $960 interest $2000 DP + $8000 PRIN + $960 INT= $10, 960
$8,000 @ 4% over 4 years= $1,280 interest $2000 DP + $8000 PRIN + $1,280 INT= $11,280
$8,000 @ 4% over 5 years= $1,600 interest $2000 DP + $8000 PRIN + $1,600= $11,600