Inc.
Your Prentice-Hall, automobile!
Chapter 8
The Automobile Decision
Is a
_____________________________
______: a good that provides
benefits that extend beyond one
year.
Expenses
Expenses for auto include:
Insurance (vehicle model, driving record)
__________________ (annual periodic
expense)
expense)
Maintenance & operating expenses (SUVs
drink more gas than a Hyundai)
Financing charges if applicable
Types of Leases
____________________ leases, or walk-away
leases
normally offer a purchase option
require the dealer to be responsible for resale
account for about 80% of all leases
______________________ leases
compare the fair market value to the leases residual
value of the vehicle
are to be avoided because you pay the difference
Leasing
Sign a lease
negotiate a fair vehicle value (also known as
the:
_________________________________)
Negotiate your trade in price (Kelly Blue book)
www.kbb.com
Negotiate a low finance charge
Choose a vehicle with slow depreciation
Your Monthly Lease Payment
Your lease payment depends on the
following factors
agreed-upon price
up
up-front fees
fees
down payment or trade allowance
residual value
finance charge
length of the lease
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Prentice-Hall, Inc.
Amount you pay for lease
No easy formula.
www.leasesource.com/workshop
Lease payments are generally less than
purchasing payments.
Many have large
_____________________
New or used?
New car:
Great ____________________ available
now:
Hyundai: 10 year, 100,000 mile warranty
10 year, 100,000 mile warranty
Chrysler, Dodge, Jeep: 7 year, 70,000 mile
0.0% financing for up to 72 months
Must meet credit qualifications
Rebates
To you or to the dealer?
New vehicles:
Invoice price
Price ____________________________ charges the
dealer
Base price
Cost of car including standard equipment & factory
warranty
Dealer sticker price
Dealer installed options, and dealer markup
Monroney sticker price on side window
Base price + manufactured installed options, fuel
economy & transportation charge
Invoice price!
Generally, the most important price to
know when shopping for a new car
The dealer cost may be less than invoice due
to:
to:
Rebates, discounts, allowances, incentives
Gives you the leverage you need to pay the
price you want for your new vehicle
www.google.com
www.buyingadvice.com
New Auto Purchase
Take advantage of new car sales, but
negotiate the price
know the dealers cost of the vehicle (from
invoice)
invoice)
understand the various dealer markups or
________________!!
be aware of any rebate(s) that may apply
New Auto Purchase (contd)
Evaluate financing alternatives
determine the length of financing
shop around to find the best interest rate
choose a financing period and rate to give
you an affordable monthly payment
www.bankrate.com
Or use PVA to figure payment
www.nadaguides.com
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Prentice-Hall, Inc.
0.0% vs. financing rebates
*Read the fine print!! You dont usually get
both!
0.0% financing may be tied to huge down
payment
payment
May be _______________________
Rebates generally go to the dealer & are
usually included in the advertised price
Cementing the deal
Making your purchase.
Negotiate the price.
Negotiate your trade in value
your trade in value
Used vehicles:
Who absorbs the initial depreciation in
price?
Some come with limited warranties
Best buy is a vehicle 2 to 3 years old
www.kbb.com
www.consumerreports.com
Consumer Protection and Your
Car
Warranties
secret warranties
lemon laws,
Evaluate financing alternatives.
Complete the purchase.
Consumer reports (have this with you)
Kelly Blue book (have this with you)
A Warranty
Secret Warranty
Is a promise by a manufacturer or dealer
that it will repair or replace defects in your
car, or that your car will be of a certain
quality for specified period of time
quality, for a specified period of time.
Aka _________________________
Under these programs, the manufacturer
will do free repairs on vehicles with
persistent problems even after the
persistent problems, even after the
warranty expires, in order to avoid a recall
and bad press.
To get these..complain LOUDLY and in
writing!!
___________________ warranty: specific
promises about the quality of the automobile
________________ warranty: the automobile
will work as expected (goes into drive when
expected and not reverse)
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Prentice-Hall, Inc.
Lemon Laws
Georgia Lemon Laws
Nearly all State Lemon Law Statutes are
based on the Federal Magnuson-Moss
Warranty Act
A vehicle that continues to have a defect
vehicle that continues to have defect
that substantially impairs its use, value, or
safety. Generally, if the car has been
repaired 4 or more times for the same
Defect within the Warranty Period and the
Defect has not been fixed, the car qualifies
as a Lemon.
1 repair attempt in the braking or steering
system or 3 repair attempts or 30 calendar
days out of service for other problems
1 year or _________________ miles.
year or
miles
Calculating Car loan payments
LOAN AMOUNT = PVA
NUMBER OF PAYMENTS = N
INTEREST RATE = I/Y
CPT PMT = MONTLY PAYMENT.
**Conversions need to be made between
APR and Monthly Percentage rate
**Conversions between Number of years
and number of months..
Abby is buying a new car for $34,000. She
is financing this loan for 5 years at an
Annual Percentage rate of 6.7%. What
are Abby monthly car payments?
are Abbys monthly car payments?
Abby is buying a new car for $14,000. She
is financing this loan for 3 years at an
Annual Percentage rate of 5.7%. What
are Abby monthly car payments?
are Abbys monthly car payments?
PVA = 34,000
I/Y = 6.7/12 OR .5583
N = 5 * 12 OR 60
CPT PMT = $668.44
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Prentice-Hall, Inc.
PVA = 14,000
I/Y = 5.7/12 OR .4750
N = 3 * 12 OR 36
CPT PMT = $424.01
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