Ba96-M2L1Notes - Chapter 8 Automobile and Housing Decisions...

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Chapter 8: Automobile and Housing Decisions Introduction Need big incomes to get loans, but are “golden handcuffs” because harder to take risks Career tip: bell shape, risk when young, later if you have loans and take risks, you are bankrupt Age discrimination: though illegal, it still exists. It is harder for the professor than the GSI to quit his current job and get a new one. This is because he can obtain a premium salary, requires higher health benefits, and is a very expensive asset for a company In middle-years, it is your asset-building stage, preparing for retirement. If you retire with $60K, you need an early retirement fund because interest accumulates. The end of the curve is death Don’t count on the government and Social Security to fund retireme nt Chapter Preview The Automobile Decision (buy, rent, or lease) Auto financing alternatives Getting the Most for your Money Applying the Planning Process Analyze current finances Develop goals Comprehensive Financial Plan Protection Build wealth Secure basic needs: liquidity, consumer purchases and credit decisions, insurance, employee benefits (Ch 5-10) Establish Auto/ Housing Decisions They are the biggest purchases in your life What do you need? What can you afford? Lease or buy? Reasons to buy Car No alternative means of transportation Car purchases are part of the financial plan Current vehicle does not meet your needs More drivers in the family than cars
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Ex. NY City, sweepers every day, so it is illegal to park more than one day because they alternate the side of the street where it is okay to park Ex. SF Problem: in Financial district, costs around $20/hr just to park car Alternatives to a Car Cab: so you don’t get tickets BART: still expensive, but less so than tickets Alternatives do exist Carshare: like Flexcar What can you afford? Textbook Example: You have determined that you have $200 per month that you can spend on a car payment. How much of a loan can you afford if the rates are 8% for a 4 year loan? PMT=$200, I=8/12, N=48; Solve for PV ONE multiple choice question on this; know calculations Information Sources General Finance.yahoo.com; money.cnn.com Choices ; Prices and Values Kelley Blue Book: Strategies Self-help books 1/2 the people in the U.S. lease a car Consumer Reports $49 unlimited 3 months access, or $14 per report Gives the true manufacturer’s price Helps you in negotiating Don’t negotiate voice price from dealer Negotiating up is easier than negotiating down True manufacturer’s price: how much t hey paid for the car How to Get a Car from a Dealer Know exactly how much the cars costs and offer 500 dollars profit Ask if they have the authority to sell, if not ask to see the manager
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