Making Automobile and Housing Decisions: Auto Buying

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# Making Automobile and Housing Decisions: Auto Buying - PowerPoint PPT Presentation

Chapter 5 Making Automobile and Housing Decisions: Auto Buying Replace the junker ... First major purchase Needs versus Wants Fit car into your annual budget Salary \$35,220 Taxes 10,000 Rent 6,500 Utilities 3,600 Food 3,000 Other 1,800

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## Making Automobile and Housing Decisions: Auto Buying

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Chapter 5

Making Automobile and Housing Decisions: Auto Buying

Fit car into your annual budget
• Salary \$35,220
• Taxes 10,000
• Rent 6,500
• Utilities 3,600
• Food 3,000
• Other 1,800
• Savings 3,520
• Car payment, insurance, operation6,800
• \$ 0
Find maximum price
• Budgeted amount \$6,800
• Insurance 400
• Operating costs 1,000
• Car payments \$5,400
Payment: \$5,400/12 = \$450

4 years x 12 mo. = 48

6%/12 mo. = .5%

Calculator

PMT: -450

n: 48

i: .5

Compute PV

\$19,161

What Can You Afford?
Choices?

2008 Honda Element -- \$18,750

2008 Honda Civic -- \$15,210

What Can You Afford?
• Payment: \$5,400/12 = \$450
• 6 years x 12 mo. = 72
• 6%/12 mo. = .5%
• Calculator
• PMT: -450
• n: 72
• i: .5
• Compute PV
• \$27,152
Other Choices

Chevrolet Malibu Hybrid -- \$23,640

2008 Mazda Miata -- \$25,030

Monthly Payment Computation

\$22,500

5 years x 12 mo. = 60

8%/12 mo. = .6667%

• 5 years (n=60): \$456.22
• 4 years (n=48): \$549.29
• 3 years (n=36): \$705.07

Chevrolet Impala

www.consumerreports.org

www.autosite.com

www.caranddriver.com

www.edmund.com

www.autoconnect.com

www.autoweb.com

carpoint.msn.com

www.kbb.com

www.nhtsa.dot.gov

www.intellichoice.com

Internet Sources of Car Information

Don’t forget about taxes, insurance, and operation!

• Negotiate with 3 or more dealers
• know the dealer’s cost of the vehicle
• understand the various dealer markups
• be aware of any rebate that may apply
• Use buyer services, e.g., www.samsclub.com, www.costco.com
• Use Internet or fax dealers yourself
• Do test drive at local dealership
• Decide on features and color you want
• On internet shop auto companies’ sites for inventory at different locations; you’ll need to insert zip codes of cities of interest
• Prices differ by location because dealers use different incentives (examples from 2002)
• Ford Explorer costs vary \$4,300 nationwide from \$32,281 in Tennessee to \$27,939 in Oklahoma according to J.D. Power & Assoc.
• Lexus RX 300 costs \$37,604 in N. California but \$35,333 in S. California.