Transportation and Buying A Car

CONSUMER ED

Overview Transportation is

considered a basic need. Get to work, get to

school, go shopping, etc.

Depending on your (and your family's) needs, your mode of transportation may vary.

Transportation Options

1. Public Transportation2. Car Share/ Rental3. Leasing a Car4. Buying a Used Car5. Buying a New Car

Public Transportation

Pros Cheapest option Environmentally

friendly May be faster at

certain times (rush hour)

Don’t have to worry about parking

Cons Not as flexible as

car ownership Lack of

convenience Dealing with

weather extremes

Difficult to transport “stuff”

Car Share/ Rental

Some people rely on public transportation for day-to-day transportation, then rent a car as needed for grocery shopping, out of town travel, or moving “stuff.”

Car shares, such as Zip Car or iGo, allow people to rent cars by the hour or day for a monthly fee.

Leasing a Car

Leasing a car is the same as renting a car.

You make a small down payment, and pay a monthly fee.

You don’t actually take out a loan.

You may choose to buy the car at the end of the lease.

Pros

Less $ up front

Cheaper monthly payment/ nicer car

Cons

You don’t actually own the car.

Mileage fees

Excess wear fee

If you buy, ends up being more expensive.

Pay for insurance, gas, registration, etc.

Buying a Car: New or Used

New Pros

That “new car” feeling

Warranty (50,000 miles)

Reliability

Cons Highest price ($15,000

and up)

Loses value ($2,000+) and becomes a used car the second you buy the car.

Pay for insurance, gas, registration, etc.

Used Pros

Cheaper

Get a decent car for a decent price

Smaller down payment/ less money owed

Cons

Unreliable aka “a lemon”

May pay more for repairs/ not under warranty

Pay for insurance, gas, registration, etc.

The Car Buying Process

1. Decide on the right car for you

2. Visit a dealership

3. Compare prices

4. Test drive

5. Negotiate a price (if applicable)

6. Determine financing options

7. Drive home in your new car!

Car Loans

Once you’ve decided on your car, now you actually have to buy it!

If you saved up and can pay cash for your car……AWESOME!

However, most people need to take a car loan.

Borrow $ from a bank and pay the $ back over time….with interest!

How A Car Loan Works (Financing)

Start with your down payment. This is the amount of $ you have saved up and will pay towards the car TODAY.

The larger your down payment, the less you’ll have to borrow, and the less interest you’ll have to pay.

You will finance the remaining amount, borrowing that $ from a bank and paying it back over time (usually 3,4, or 5 years) Of course, any time you borrow $ you have to pay

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Example Example:

Car costs $10,000 You make a $2,000 DOWN PAYMENT You borrow $8,000 from a bank and pay it back over the course

of 3, 4, or 5 years. Longer payback period means lower monthly payments but

more interest over time.

$8,000 @ 4% over 3 years= $960 interest $2000 DP + $8000 PRIN + $960 INT= $10, 960

$8,000 @ 4% over 4 years= $1,280 interest $2000 DP + $8000 PRIN + $1,280 INT= $11,280

$8,000 @ 4% over 5 years= $1,600 interest $2000 DP + $8000 PRIN + $1,600= $11,600