Purchasing a Car - Overview

1. Purchasing a Car - Overview Chapter 1

2. Opening Activity • What is your dream car and why? • What would a realistic car purchase for you and why? • What are some similarities and differences of the two cars? • Take 5 minutes to type your answers. Be sure to submit on our class website. • We’ll then discuss some answers as a class. • A song to listen to as you answer the questions: Billy Ocean - Get Out Of My Dreams, Get Into My Car

3. Opening Activity

4. Introduction • Video which provides a great summary of this topic • Buying a Car - Smarter About Money

5. Vocabulary • Trade-In Value • Selling Value • New Car • Used Car • Buying • Leasing • Down Payment • Kelly Blue Book • Car Warranty • Car Maintenance • Variable Costs • Invariable Costs • Buyer Incentives • Buyer Discounts • MSRP • Principal • Interest Rate • Monthly Payment • Credit Union • Bank

6. Closing Activity • Discuss makes of cars that you deem better than others and explain your answer. Try to name 3 makes of cars that you both like best. (ex. We like Ford’s because…) • Now that you’ve named 3 makes of cars, do you hear any news reports about these? If so, explain how you’ve heard about them. • Think if your parent’s would’ve said the same thing about these makes of cars when they were your age. Explain whether you think they would have or would not have. • Work with a partner on this assignment. • Take a piece of paper. Write both of your names on it. Then write your answers & submit to me before leaving. • Worth = 5 points

7. Opening Activity • How familiar with the car buying process are you? • Have you and your parents had a talk on buying a car? What have they said to you? • Do you comfortable with the car buying process? • Take the beginning 5 minutes of class to type your responses. Be sure to submit them on our class website. • We’ll discuss some answers as a class. • A song to listen to as you answer the questions: Bachman Turner Overdrive - Roll On Down the Highway

8. Opening Activity

9. 10 Car Buying Tips • Make sure you’re getting the right vehicle • Assess the worth of your old car • Decide whether new or used is best for you • Consider whether leasing or buying makes sense • Do your homework and set your target price • Shop for money before you shop for a car • Negotiate a lease • Negotiate a purchase price • If you hate haggling, consider using a car shopping service • Don’t let the deal-closer close out your savings

10. The Right Vehicle • Most important factor: The car is appealing to you • Determine the main purpose for your driving • (i.e. commuting, hauling kids, weekends only, vacations) • Gas mileage considerations • Eco-Friendly considerations • Consumer Safety Report (CSR) considerations.

11. The Right Vehicle

12. Closing Activity • Next visit the following website: www.newcars.com/carchooser • Instructions: • This website will walk you through some of the decision making processes involved with buying a car. • Print out 3 vehicles that interest you. • On the back of the print out, explain why this car is appealing to you. • Submit to me before leaving class. • Worth = 20 points

13. Opening Activity • How do you feel that buying a car will impact your budget? • What can you do to free up some extra money in your budget for a car? • How much do you think the volatility of gas prices will effect you as a driver? • Take 5 minutes to type your answers. Be sure to submit on our class site. • We’ll discuss as a class some answers that you came up with. • A song to listen to as you answer the questions: Madonna - American Pie

14. What Can You Afford? • You must maintain a monthly budget • General Rule: 10%-15% of your monthly budget should be spent on a car • New cars come with warranties which last 3 years • New cars increase your insurance cost • Opt for a later model to help reduce insurance costs • Check the record of the car to further reduce insurance costs

15. New vs. Used New Car Factors: • The car has never been used • The car can be equipped as you choose “Bells & Whistles” • You’ll receive the full factory warranty • Your car is much more reliable • Your car performs as it is supposed to • You’ll temporarily enjoy the “new car” smell • Lemon Laws protect buyers

16. New vs. Used Used Car Factors: • “Certified” used cars are being offered by dealers • Verify the odometer of the car • Pay money to have the car inspected by a mechanic • During the inspection, use the “touch & comment” technique • Important factor: Anything is negotiable, except the right to inspect • Only if dealing with personal sellers, not car dealerships

17. New vs. Used Used Car Pointers: • Use National Auto Dealers’ Association • Negotiate an acceptable price before you get the car inspected • Arrange for multiple test drives of the car • The occurrence of multiple glitches should deter you from purchasing • It is still a used car. So expect to hear, “pings”, “dings”, and “rattles”

18. New vs. Used

19. Closing Activity • Pair up with a classmate. • What are your feelings about a new car vs. a used car? • Does your current financial situation and ability encourage to buy a used car? Why or why not? • Do societal demands play a factor in the purchasing of a new car? Why or Why not? • Take a piece of paper and write both member’s name. Then write you answers. • Submit to me before leaving class today. • Worth = 10 points

20. Opening Activity • When you decide on a car, is buying it your only option? Why or why not? • Why do car commercials offer the leasing price, rather than the purchasing price? • How do you think the current economic downturn has effected the car purchasing industry and finances? • Take 5 minutes to type your answers & submit on our class site. • We’ll then discuss some answers as a class. • A song for you as you answer the questions: The Beach Boys - 409

21. Buy or Lease? Buying: • You take ownership of the car. It is now your asset. • You reserve the right to trade-in the car, or sell the car at any point in time that you desire. • The best opportunity to value when buying a car is to keep the car for an extended period of time after you’ve completed paying your auto loan.

22. Buy or Lease? Leasing Vocabulary: • Capitalized Cost = selling price • Residual Value = the estimated worth of the car at the end of the lease • Money Factor = interest rate • Be aware that the language used in a leasing contract will vary from the language used in a buying contract!

23. Buy vs. Lease Leasing: • The dealership maintains ownership of the car. The car is still an asset to the dealership • Leasing requires a down payment of 10%-20% • Leasing comes with contractual restrictions • Leasing costs more than buying • In leasing a car, you’re paying the monthly depreciation • At the end of the lease, you must decide to purchase or to trade-in for a different car to lease • Choose leasing if you’re certain you don’t want the car

24. Buy vs. Lease Leasing Pointers: • Look for manufacturer-subsidized leases because they’re likely to be the cheapest • Visit leasewizard.com: • Identifies the best current leasing programs • Includes standard residual value data • Provides options for changing lease terms & mileage limits • Set a target price & negotiate • Aim to pay about 2% above dealer’s listed price • Dealers get incentives too. So their cost is often much lower than listed, which gives you more room to negotiate on price

25. Buy vs. Lease

26. Closing Activity • Independent work. • Choose 3 cars that you’d like to buy. • Locate the buying price and the leasing price for each car. • Answer these questions. Submit your answers & prices to me before leaving today. • Are any of these cars more appealing as a result of the lease price? If so, explain which car and why. If not, explain why the leasing price isn’t an important factor for your decision. • Is leasing a viable option for you? Why or why not? • Worth = 10 points

27. Opening Activity • How do you plan to pay for the car you want to buy? • Is it a good idea to have a down payment? Why? • Are there many banks that offer car financing? • What options are available if the bank won’t lend you money to buy the car? • Take 5 minutes to type the answers. Be sure to submit on our class site. • Here’s a familiar song to listen to: Rascal Flatts - Life Is A Highway

28. Money 101 • It is best to get pre-approved for a loan, so you can focus on negotiations of the price • Pay attention to the length of the pre-approved loan • Many manufacturers offer financing options • Many manufacturers offer rebates to lower the price of the car, rather than offering low interest rates • This could be an ideal situation if you’re struggling to get financing on the higher price of the car • Investigate many banks and their auto financing prices • Credit Unions offer loans typically 0.5%-1% lower than traditional banking institutions • Credit Unions require membership, usually through professional organizations

29. Money 101

30. Money 101 • Independent In-Class Activity. • Write down your answers and submit before you leave. • You’ll be given 10 minutes to do this assignment. • Look at 3 banks & 1 credit union. • Find information from these banks on their auto loan rates & compare them. • Think about all of the factors involved with the rate. (i.e. rate, length, membership requirements) • Find a variety or banks. (i.e. local chains, national chains) • Worth = 10 points

31. Targeting a Price • Visit edmunds.com & KBB.com: • To determine the dealer’s cost • Find information on customer or dealer rebates • Find information on subsidized lease deals • Find other special breaks that can reduce your cost • Dealer Incentives- rebates given to dealers on slower moving models • If you know of these, you can reduce the price of the car (generally in half) • The latest models and most popular models offer the least amount of room for negotiation • Older models and less popular models offer the most room for negotiation because dealers want these off their lots

32. Closing Activity • Game Instructions: • Go to www.fordcredit.com • Scroll over Finance Tools from the grey menu bar • In the drop-down list, select Understanding Credit • In the bottom right corner, select Fun and Games – Credit Style • Then select the Featured Game • The game is a Wheel of Fortune inspired game and it offers questions on credit. • You have the remainder of class to do this game. • You may work with a partner if you want to.

33. Opening Activity • Why is the negotiation period the most critical for your success? • What do you expect to encounter during the negotiation process? • In what ways can you better prepare for negotiations? • Take 5 minutes to type your answers. Remember to submit them on our class site. • We’ll take 5 minutes as a class to discuss answers. • A song to listen to as you answer the questions: Sammy Hagar - I Can't Drive 55

34. Negotiating a Deal

35. Negotiating a Deal • Start reasonably low on your price talks • Don’t low-ball because you don’t want to appear as uninformed • Assemble all your research in a folder that you can bring to the table during negotiations • Once in the show room, quickly establish yourself as a buyer • The salesman will start to question you in efforts to pinpoint profit points for them. But maintain a focus on talking about price • Avoid lengthy talk on the MSRP. Show the salesman that you’ve done research to adjust his price point talk

36. Negotiating a Deal • Have a concrete plan on your finances and car options. • Do NOT hesitate because it shows uncertainty and the salesman will pounce upon the opportunity for profit. • Make an offer and inform the salesman that you don’t intend to wait long. • If time still passes, get up and walk around the show room or lot to show your gravity in the situation. • Upon the salesman’s return, offer a comfortable price and tell him to go renegotiate. As he is doing so, get up and continue to walk through the show room to demonstrate to the salesman that he’s letting a sale slip away because you’re losing interest. • Always look at multiple dealerships for offers. • Agree upon a price, and then mention that you have a trade-in. Then the trade-in isn’t already calculated into the reduced price.

37. MSRP vs. Invoice

38. Trade-In

39. Closing a Deal • Listen to the dealer’s financing options – might be better • You’ll be offered an extended warranty • Consumer Reports states that these aren’t worth the cost • Buy only if your car has known dependability issues • Ask what the manufacturer’s warranty cover. • Ask when the extended starts and what if covers • Be aware that most extended warranties, only cover power train issues. Most problems you’re likely to encounter following your warranty are electrical issues • You’ll be offered a security option which costs $1,100 • They etch your VIN into the glass of your windows and this supposedly makes your car less appealing to robbers

40. Closing Activity • You have a homework assignment. • Find time tonight to talk with your parents about the car buying process. • Get as much information from them as you can. • Go through the whole process, as we did, and ask questions at every step. • Create a document in Microsoft Word. Then submit it to me on our class website. • This will be a completion grade only. • Worth = 20 points.

41. Purchasing a Car - Costs Chapter 2

42. Opening Activity • List costs for a car that remain the same monthly. • List costs for a cat that vary monthly. • Do these costs make the car more or less expensive than you originally thought? Why? • Take 5 minutes to type your answers. Remember to submit your answers on our class site. • We’ll take discuss answers you came up with as a class. • A song to listen to as you answer the question: The Playmates - Beep Beep

43. The Real Cost Video

44. Vocabulary BBB Warranty As-Is Warranty Implied Warranty Dealer Warranty Manufacturer Warranty Depreciation Fixed Expenses Flexible Expenses Budgeting

45. In-Class Activity • The Operating Costs of a Motor Vehicle • Activity 9-1 • Model Year: 2012 • Make, Size, Model: Ford Focus SEL Sedan • We’ll do this activity as a class. • Part 2: you’ll be given 15 minutes to do. • Submit this to me by the end of class.

46. Opening Activity • What happens if sign documents for an extended warranty, but then you change your mind and decide against having the extended warranty? • What options do you have if you feel as though the dealership lied to you in order to get you to buy the car? • Take 5 minutes to answer the questions. Be sure to submit the answers on our class site. Feel free use “Google.” • We’ll then discuss the answers as a class. • Here’s a song to listen to: Prince - Little Red Corvette

47. Car Warranty Video

48. In-Class Activity • Warranties and Service Contracts • Activity 9-2 • Work with a partner. Be sure to have both names on it before turning it in • You’ll have 15 minutes of class time to complete the assignment • Use the copy of the Ford Focus Warranty to answer the questions • The warranty is on the class site titled: Ford Warranty • Worth = 20 points

49. Closing Activities • Go to www.ford.com • At the bottom of the screen under Ownership, select Warranty & Service Plans • Create a table in Microsoft Word that compares every warranty option offered by Ford • You’ll be given the remainder of the class period to complete this activity • You may work with a partner. Be sure to include both names on the table print-out • Worth = 20 points

50. Opening Activity • Why do the banks charge you interest for a loan they gave to you? • Is the interest you get charged effected by your credit score? Why? • What can you do to establish a credit history? • Take 5 minutes to answer. Be sure to submit answers on our class site. Feel free to use “Google.” • We’ll then discuss as a class the answers. • Here’s a song to listen to: • Johnny Cash - I've Been Everywhere