Purchasing a Car: Lesson 1 Coach Markus
Essential Questions • Should I buy a new car or a used car? • Where can I find the best car loan to finance my purchase?
Video Interlude Funny Money Guy: Buying a Car
Objectives • Identify costs of owning and operating a car. • Identify factors to consider when shopping for a car. • Identify factors to consider when shopping for a car loan and car insurance. • Determine how much money can safely be spent each month to own, operate, and maintain a car within a given budget.
Costs of owning a car Ownership: • Purchase Price • Sales Tax • Registration, title, and license • Financing costs • Insurance
Costs of owning a car Operational: • Gasoline • Oil and other fluids • Tires • Maintenance and repairs • Parking and tolls
Decisions, Decisions When purchasing a car, many decisions will need to be taken into consideration.
Quality What level of quality do I want? What level of quality do I need?
Cost How much do I want to spend?
Car Model Should I choose a car with a well-known name even if it costs more?
Research What do consumer magazines say about the kind of car I want?
Recommendations Do I know someone who owns the kind of car I want?
Timing Should I wait until there’s a sale on the kind of car I want? Should I wait until interest rates drop?
New or Used What is the difference? Have I weighed my options?
Where to buy Private dealer or private party?
Before you SHOP Which car model and options do I want?
Before you SHOP What is the invoice price? What is the true cost to the dealer?
Before you SHOP How much am I willing to pay the dealer above the invoice price?
Before you SHOP What is the value of my present car that I will be trading in?
Before you BUY Take the car for a test drive.
Before you BUY Make your offer to as many dealerships as possible. Compare final sales prices and buying services.
Before you BUY Compare financing costs.
Before you BUY Try to sell your old car yourself. Why? • Dealers give better deals with no trade-in • Dealers will not give you as much for your car
Before you BUY Consider if you need an optional (extended) service contract.
Car buying realities • How much can I AFFORD to spend? • Is there a shop nearby that works on my car? • Are parts readily available for my car? • What kind of financing will I qualify for? • Do I know how to read a buyers guide sticker?
USED car purchasing If you are buying from a dealer, know the reputation of the dealership.
USED car purchasing What type of warranty, if any, comes with the car?
USED car purchasing Know what type of service contract, if any, comes with the car.
USED car purchasing Do you know the maintenance or accident history of the car? www.carfax.com
USED car purchasing Take the car for a test drive, or multiple drives in different conditions.
USED car purchasing Have the car inspected by an independent service maintenance person. Especially if buying from a private party.
Used Car Sources New-car dealers: • Provide quality used vehicles • Have a service department available • Ask higher prices than other sources
Used Car Sources Used car dealers: • Specialize in previously owned vehicles • Offer only limited warranties (if any) • May sell vehicles in poor condition • Can have shady reputations
Used Car Sources Private Parties: • Can offer a good buy if the vehicle was well maintained • Offer little consumer protection • Can be awkward if the car has a lot of issues
Used Car Sources Other sources: • Auctions (Government or private) • Rental companies • Internet (E-bay, etc.)
Kelley Blue Book (KBB) www.kbb.com
How many prices are there?? • List price/Retail price/Sticker price: Asking price by the dealer. Sometimes negotiable. • Invoice Price/Dealer Invoice price: The price the dealer paid the manufacturer for the car. • Base Price: The price of the car before options. • Book Value: Pricing book prices (KBB is most popular)
Warranties What is a warranty? A written guarantee to make needed repairs on a car within a limited period of time.
Warranties As-is (no warranty): If you buy a car and have problems with it, you must pay for this yourself. • On most used cars, unless the dealership has a limited warranty plan.
Warranties Dealer warranties: Offered and specifically written by the dealer. Terms and conditions can vary greatly, so it is useful to compare warranty terms on similar cars or negotiate warranty coverage.
Warranties Manufacturers warranties (unexpired): The manufacturers warranty can sometimes be transferred to the new owner. Manufacturers warranties usually are for 36,000 miles or 3 years, whichever comes first. Some are more, depending on brand.
Warranties Service contract (Extended Warranty): Goes into effect after the manufacturers warranty expires. Designed to avoid costly repairs as a motor vehicle gets older.
Service Contract • Cost • Coverage • Deductible • Limited to a certain dealership • Towing coverage • Cancellation or refund policy • Reputation of warranty company • Cost of purchasing later