Costs of Buying a Car Part 1 (in the future)

COSTS OF BUYING A CAR PART 1

(IN THE FUTURE)Because you will likely need/want to drive places.

HOW DOES BUYING A CAR AFFECT YOUR PERSONAL BUDGET?

WHAT ARE SOME THINGS ABOUT A CAR YOU MIGHT CONSIDER WHEN BUYING A CAR?

WHAT ARE SOME COSTS YOU MIGHT CONSIDER WHEN BUYING A CAR?

Challenge:

COSTS OF OWNING & OPERATING A CAR

Ownership Fixed Costs Operating Variable Costs

Paying Off Car (depends on original cost)

Interest on Loan Insurance Registration Fee, License,

Taxes

Gas Oil & other fluids Tires Maintenance & Repairs Parking & Tolls

How much do you think each of these costs actually cost? (estimate)

FOR A HYUNDAI ACCENT?

HOW MUCH CAN YOU AFFORD?

Follow the 20-10 Rule… Never borrow more than 20% of your yearly net income.

Monthly payments should never exceed 10% of your monthly net income.

Ex. What does this mean if you make $400 a month?

WHAT ARE SOME QUESTIONS YOU SHOULD ASK YOURSELF WHEN BUYING A

USED CAR?

Challenge:

WHERE TO SHOP FOR A USED CAR…New Car Dealers: Quality Used Vehicles Service Dept. Available Usually More Expensive

Used Car Dealers: Specialized in Used Vehicles Limited Warranties (if any) May be in Poor Condition

Private Parties Good Buy if Vehicle Well-Maintained Few Consumer Protection Regulations Apply

THINGS TO CONSIDER WHEN SHOPPING FOR A CAR…Before you shop: Decide how much you can afford to spend Decide on model and research reliability Find out where repairs can happen and if parts are

available Shop for financing and determine costs/payments

As you shop: Find out reputation of the dealer Find out about types of warranties and service deals

WHAT DO YOU HAVE TO FIND OUT ABOUT A LOAN?

(WHAT DO YOU REMEMBER ABOUT CALCULATING LOANS?)

Challenge:

SHOPPING FOR A CAR LOANVariables include: Annual Percentage Rate

(APR) Length of Loan Monthly Payments Total Finance Charge Total to be Repaid

ESTIMATING THE COST OF A LOANInterest = Amount of Loan x APR x Number of

Years

Total Cost of Loan = Amount of Loan + Interest

Ex. Estimate the total cost of a $10 000 loan at 10% APR for 5 years.

ESTIMATING THE MONTHLY PAYMENTSMonthly Payments = Total Cost of Loan ∕ Total Number of

Months

Ex. Estimate the monthly payments for the previous loan

Do you think these calculations are accurate? Why or why not?

DETERMINING A BUDGETWHAT CAN MANUEL AFFORD?WHAT CAN YOU AFFORD?

Assignment: