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Overview

Few of us live, work, and shop within a small geographic area. Most of us need transportation to go to work or school or for other reasons. Transportation, and more specifically the automobile, has become a necessity for most of the people in our society. Your selection and use of an automobile is a fundamental part of your personal financial plan. Whether you buy a new car or a used car, there are proven strategies that will make the experience better and minimize your costs. In this unit, you will investigate the steps in buying a car and in financing the purchase. You will determine the costs associated with owning and operating a vehicle including maintenance, insurance and fees.


Cars and Insurance - Getting a Set of Wheels


In this unit, you will . . .

  • describe the process of buying a new or used car, including selection, financing, and wise buying practices

  • explain automobile leasing costs, processes, advantages, and disadvantages

  • list the costs of owning and operating a car

  • explain the different types of automobile insurance and strategies for reducing costs


Vocabulary

APR

ASE Certified Mechanic

Bait and Switch

Base Price

Beneficiary

Blue Cross/Blue Shield

Car Make

Car Model

Cash Value

Certified Used Car

Collision Insurance

Comprehensive Insurance

Copay

Cost of the loan



Dealer Cost

Dealer List Price

Deductible

Depreciation

Disability Insurance

Down Payment

Extended Warranty

Factory Warranty

Factory-to-Dealer Holdbacks

Factory-to-Dealer Incentives

Gap Insurance

HMO Insurance

Invoice Price

Leasing


Lemon

Liability Insurance

Medical Payments Insurance

Medicare


Miles per Gallon (MPG)

Monroney Sticker Price (MSRP)

POS Insurance

PPO Insurance

Premium

Residual Value



Social Security Insurance

Term Life Insurance

Uninsured Motorist Coverage

Upside-down

Vehicle Identification Number (VIN)

Whole Life Insurance



Worker's Compensation Insurance

test




Directions'>Section1

Directions: Identify your personal transportation wants and needs by answering the following questions:
How will you use your car? Choose all that apply.

Drive to school

Drive to work

Carry friends

Carry family members

Hauling

Sports and Recreation


What kinds of roads will you drive on? This will help you decide whether you need a front-wheel, rear-wheel, or four-wheel drive vehicle.



Highway

City


Suburban

Rural


Off-road

Mountain roads & Snow conditions


Where will you park your car most of the time? Your parking space will determine the amount of money you will want to spend if the car isn’t protected from the weather or theft.



Driveway

Street


Parking lot

Garage


What extra features would you like in a car?



Sun roof/Moon roof

Manual transmission

Navigation System

Automatic transmission

Deluxe Safety Features

Four-wheel drive

Deluxe Audio System

Leather Seats

Video System

Third-Row Seat

Roof Rack

Heated Seats

Cruise Control

______________________

______________________


How will you carry insurance? Identifying your insurance requirements will help you gain an accurate quote from an insurance company.



Your parents’ policy

Your own policy



Do you qualify for any insurance discounts? Knowing what discounts you qualify for will help you to get an accurate quote from an insurance company.



Good student

Non-drinking and nonsmoking

Driver’s education

No past accidents or tickets


Do you plan to purchase a new or a pre-owned car?

New car (average cost is $25,000)

Pre-Owned car (average cost is $15,000)



  • What is the maximum age of the car you will accept? ____________________

  • What is the maximum number of miles you will accept? ____________________

How will you pay for your vehicle? You need to know how you will pay for your car to prepare for financing a loan, if required.

How much money can you contribute? ___________________

How much money will your parents contribute? ___________________

What is the maximum loan you can afford? ___________________

Total Available for car purchase ___________________


Section 2

Directions: Identify three types of vehicles that meet your criteria and complete the questions below. Research to compare pricing and features for your three choices. Possible online resources include:

www.carfax.com

www.nadaguides.com

www.edmunds.com

www.consumerreports.com

www.fueleconomy.gov

www.safercar.gov




Vehicle 1: Year:____________ Make:_____________________ Model:____________________
Price:________________ Highway MPG:_________ City MPG:_________ Miles:_____________

Annual Fuel Cost:______________ Monthly Fuel Cost:______________ Safety Rating:__________

Features:


Sun roof/Moon roof

Manual transmission

Navigation System

Automatic transmission

Deluxe Safety Features

Four-wheel drive

Deluxe Audio System

Leather Seats

Video System

Third-Row Seat

Roof Rack

Heated Seats

Cruise Control

______________________

______________________




Vehicle 2: Year:____________ Make:_____________________ Model:____________________
Price:________________ Highway MPG:_________ City MPG:_________ Miles:_____________

Annual Fuel Cost:______________ Monthly Fuel Cost:______________ Safety Rating:__________

Features:


Sun roof/Moon roof

Manual transmission

Navigation System

Automatic transmission

Deluxe Safety Features

Four-wheel drive

Deluxe Audio System

Leather Seats

Video System

Third-Row Seat

Roof Rack

Heated Seats

Cruise Control

______________________

______________________




Vehicle 3: Year:____________ Make:_____________________ Model:____________________
Price:________________ Highway MPG:_________ City MPG:_________ Miles:_____________

Annual Fuel Cost:______________ Monthly Fuel Cost:______________ Safety Rating:__________

Features:


Sun roof/Moon roof

Manual transmission

Navigation System

Automatic transmission

Deluxe Safety Features

Four-wheel drive

Deluxe Audio System

Leather Seats

Video System

Third-Row Seat

Roof Rack

Heated Seats

Cruise Control

______________________

______________________


Which vehicle would you choose and why?




Down Payment: The amount of your own money you pay upfront for the vehicle. It is recommended that you make a 10% to 20% down payment. The larger the down payment you are able to make, the less principle you will need to borrow.
SECTION 1

Directions: Use the examples given to compute the down payment required to purchase the following vehicles:
Vehicle Price 10 % Down Payment 20% Down Payment

Truck $13,000

Sedan $23,000

Coupe $18,500


SECTION 2

Directions: Access the website Edmunds.com and locate the Payment Calculator on the main page under “New Cars” tab, Calculators, find the “More Calculators” link on the left. Use the Payment Calculator to complete the calculations outlined below. You will need to enter the down payment, purchase price, interest rate, and loan term. Pay particular attention to the effect of changes in the interest rate, down payment, and length of loan. http://www.edmunds.com/calculators/car-loan.html
Directions: Use a Payment Calculator to complete the calculations outlined below. Pay particular attention to the effect of changes in the interest rate, down payment, and length of loan.
1. Cost of Vehicle (Purchase Price) $9,000 Loan Term 36 months

Interest Rate 9% Down Payment 10%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________


2. Cost of Vehicle (Purchase Price) $9,000 Loan Term 36 months

Interest Rate 6% Down Payment 10%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________

3. Cost of Vehicle (Purchase Price) $9,000 Loan Term 48 months

Interest Rate 9% Down Payment 10%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________


4. Cost of Vehicle (Purchase Price) $9,000 Loan Term 36 months

Interest Rate 9% Down Payment 20%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________
5. Cost of Vehicle (Purchase Price) $15,000 Loan Term 48 months

Interest Rate 9% Down Payment 10%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________


6. Cost of Vehicle (Purchase Price) $20,000 Loan Term 60 months

Interest Rate 6% Down Payment 10%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________


7. Cost of Vehicle (Purchase Price) $5,000 Loan Term 48 months

Interest Rate 6% Down Payment 20%

Monthly Payment:___________ Total Loan Amount:____________

Cost of the Loan (Total Interest):____________

Section 3

Directions: Evaluate the preceding loan options and identify three things you noticed about the effects that the interest rate, length of the loan, and amount of the down payment have on the cost of the loan or the monthly payments.









Section 4

Directions: Complete the loan information for the car or your choice. Then select a loan term.
Car Manufacturer, Make and Model:

Purchase Price:__________________________ Down Payment:



Starting Loan Amount:____________________ Current Interest Rate: %




36 months

48 months

60 months

Monthly Payment










Total Amount Paid
(months x payment)










Cost of Loan
(Total Interest)










Which loan term did you select? ☐36months ☐48 months ☐60 months
Section1

Directions: Go to http://www.federalreserve.gov/pubs/leasing/. Use the information on the site to complete the chart. You may summarize the information in your own words if you wish.


Item

Leasing

Buying

Ownership







Up-Front Costs







Monthly Payments






Early Termination







Vehicle Return







Future Value







Mileage







Excessive Wear







End of Term







Section 2

Directions: Go to http://www.federalreserve.gov/pubs/leasing/. Use the information on the site to answer the questions.
1. What items will you need to pay for at the beginning of the lease?









  1. What items will you pay during the lease?







  1. What items might you pay at the end of the lease?



  1. What lease items can sometimes be negotiated?











  1. What are your rights as a lessee?







  1. What are your responsibilities as a lessee?





Directions: Go to http://www.metlife.com. From the menu bar across the top of the screen, select Life Advice. From the list in the middle of the screen, select Insurance. From the list in the middle of the screen, select Auto Insurance. Use the information on the site to answer the questions.


  1. Name at least seven (7) things you should do if you are in an accident?



















  1. What is liability insurance?







  1. Explain the two different types of liability insurance?









  1. Explain what the number 50,000/100,000/30,000 represents.









  1. What is the difference between Comprehensive and Collision coverage?











  1. What is a deductible?





  1. What is uninsured/underinsured motorist protection, and why do some states require it?











  1. What kinds of bills or costs will Medical Payments/PIP coverage provide?







  1. What are the seven (7) factors that determine or affect your auto insurance premium?















  1. Name four (4) ways teens can save money on car insurance?









  1. What are the six (6) basic elements available in a typical automobile insurance policy?















Directions: Go to http://www.dmv.org. Select Pennsylvania as the state. Search the site for “required auto insurance.” Use the information on the site to answer the questions.


  1. What is the minimum amount of insurance required to legally drive a car in Pennsylvania?











  1. What are the consequences to driving without the proper amount of Pennsylvania car insurance?





Directions: Complete the chart by filling in the appropriate term on each line. Note: terms in the Word Bank may be used only once.




Word Bank

Blue Cross/Blue Shield

Disability Insurance

Health insurance

HMO


Life Insurance

Medicare/Medicaid

POS

PPO


Private pay

Social Security



Term

Whole life



Worker’s Compensation







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