Transportation

Researching an Automobile

What should I look for?

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Transportation

Part of everyone’s life

15 – 20% of an individual’s budget

Automobile is the 2nd most

expensive purchase, only after a

home

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Types of Transportation

Car

Motorcycles

Bicycle

Walking

Public

• Train, taxi, subway, bus, plane

Carpooling

• An arrangement to share private transportation

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Public Transportation

Pros Cons

May not be convenient or require more travel time

Availability depends on the

location

Does not require extra cost of ownership expenses

Typically cost effective

Examples include: taxi, subway, bus, etc.

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Purchasing a car

Advantages of Car Buying Disadvantages of Car Buying

Higher down payment is generally

required.

Higher monthly payments

You're responsible for maintenance

costs once the warranty expires.

Trade-in or selling hassles when you're

ready to get rid of your car

More of your ready cash is tied up in a

car, which depreciates, rather than an

investment that appreciates.

Pride of ownership — you can modify

your car as you please.

Car buying is more economical in the

long run unless you buy and trade-in

regularly.

No penalty for driving excess mileage

Increased flexibility — you can easily

sell the car whenever you want.

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Leasing

You pay a specified amount of money

(usually monthly) for a specific time

Once lease expires, vehicle returned to the lease grantor

Read the contract closely – look for

hidden costs

Leasing – renting a product while the ownership

remains with the lease grantor

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Leasing a car

Advantages of Car Leasing Disadvantages of Car Leasing

You don't own the car at the end of the

lease.

Your mileage is limited to a set amount,

typically 12,000-15,000 miles a year

(excess miles are paid for at the lease

termination).

Lease contracts are confusing.

Leasing is more expensive in the long

run (as opposed to buying and driving

until the wheels fall off).

Wear-and-tear charges can add up (paid

at lease termination).

It's costly to terminate a lease early if

your driving needs change.

Lower monthly payments

You can drive a better car

for less money each month.

Lower repair costs (With a three-year

lease, the factory warranty covers most

repairs.)

You can more easily drive a new car

every two or three years.

No trade-in hassles at the end of the

lease

You pay sales tax only on the portion

of the car you finance.

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Want to Buy a Vehicle?

Consumers should plan their vehicle purchase to

avoid any costly mistakes

Any large purchases should be planned

Places to purchase a vehicle:

• Dealership, private owner, internet

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Planned Buying Process

1. Prioritizing wants

2. Pre-shopping research

3. Fitting the budget

4. Comparison shopping

5. Negotiating

6. Making the decision

7. Evaluating the decision

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 1 - Prioritizing

Wants

Assess transportation needs and wants

• Need: something thought to be a necessity

• Want: something unnecessary but desired

Consider all automobile options as wants

• Prioritize the wants from low to high priority

• Prioritizing wants helps the consumer

• Consider costs and benefits of different vehicle options

• Consider the “big picture” of the vehicle purchase rather than

a specific want (such as heated seats, color, engine size, etc)

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Prioritizing Wants –

Questions to Think About

How will the vehicle be used?

Where will the buyer be living?

How will the vehicle be stored or

parked?

How much will it be driven?

What options would the buyer like in

the vehicle?

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 2 – Pre-shopping

Research

Research should be based on transportation wants

Complete this before visiting a car dealership or

salesman

Helps the buyer to be informed about:

• What they are looking for

• Vehicles in their price range

• Available options

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Ways to Perform the

Research

Family & friends

• Experiences with different

makes and models of

different vehicles

• Likes, dislikes, and

recommendations

Periodicals

• Consumer Reports

• Kelley Blue Book

• Motor Trend

• Car and Driver

• Edmunds

Access this information at the

public library and/or the internet

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Price Research

Price

• Base price: vehicle price with standard equipment, no extra

options

• MSRP: Manufacturer’s suggested retail price

• Includes base price, price of options installed by manufacturer,

and their transportation charge

• Sticker Price:

• Dealer’s initial asking price

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Price Research

continued

Price continued• Determine how much a dealer paid to help decide which

vehicles to consider and to negotiate a fair price

• Invoice Price: The amount the dealer paid to but the car from the

manufacturer

• Consumer Reports, Kiplinger’s Personal Finance magazine, and Edmund’s New Car Prices

• Used cars• Blue book price: dollar value given to the vehicle based on its year

and model

• Used as a guide for car dealers and banks for pricing trade-ins

• Kelley Blue Book

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Vehicle Options

Research

General type of vehicle

• Car, truck, 2-door, SUV, sporty

Make and model

• Examples: Ford Taurus, Honda Accord

Safety

• Braking and emergency handling, airbags

Reliability

• Some specific models have high marks, may be higher priced but

will save on repair costs

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Vehicle Options

Research continued

Fuel economy

• Type of gas used, gas mileage

Power and performance

• Driving on highways, steep hills, mountains, snow,

muddy roads, or in a city

Comfort and convenience

• Size of headroom and legroom, cargo space

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Vehicle Options

Research continued

Insurance

• Chosen vehicle affects the price of insurance; obtain a

quote for the vehicles being considered

Other options

• Power steering and brakes, manual or automatic, air

conditioner, rear-window defogger, radio/tape/CD

player, type of tires, cruise control, sun roof, heated

seats, power door locks and windows, etc.

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

New vs. Used Research

New Vehicle:• Not pre-owned

• Warranty

• Manufacturer options

• Expensive

Used Vehicle:

• Cost less to buy

• Cost less to insure

• May offer warranty

• Have an independent

mechanic inspect any used car

before purchase

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 3 – Fitting the

Budget

“Can I afford it?”

• Most important question

Amount the buyer can afford in his/her budget

dictates the vehicle price

All costs must be taken into consideration before

choosing a vehicle

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Fitting the Budget

continued

Fixed expenses• Insurance costs

• Loan payment and interest if financed

• Licensing

• Registration

Flexible expenses• Maintenance

• Gas

• Oil

• Repairs

*Vehicle price is not the only cost involved

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Marina’s Out-of-Pocket

Expenses

5-Year Average Out-of-Pocket

(15,000 miles driven per year)

Fuel $9,852

Insurance $3,915

State fees (licensing) $1,932

Maintenance $1,945

Repairs $1,758

5 Year Total $19,402

Monthly Amount $323.37

Monthly Payment

Purchase Price $21,548

Down Payment $2,154.80

Interest Rate 2.84%

Monthly Payment $347.09

Total Paid (down payment + loan)

$22,980.20

Marina’s monthly loan is $347.09, but on average, the car will cost her,

$670.46 per month to own!

Marina purchased a 2013 Honda Accord

Source: bankrate.com Source: kbb.com

Stop to complete

activity

• What Do I Want/Need in a Vehicle?

• What Types of Vehicles Fit My Needs?

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 4 – Comparison

Shopping

Comparing services or products to determine the

best buy or quality product at a fair price

Allows the consumer to build upon the

information learned in the pre-shopping research

*As the price of a vehicle increases, consumers are

often not buying additional safety, capacity, or

power, but instead style and prestige

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparison Shopping

continued

Narrow the choices to a few specific makes and models with desired options

Visit the appropriate store to learn more information about each choice to make comparisons• Inquire about price, dealer incentives, financing options,

leasing, warranties, and service contracts

Test drive each potential vehicle

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparison Shopping

continued

Goal of comparison shopping

• Narrow the choice even further to negotiate for the best

deal

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 5 - Negotiating

Obtain a firm price before discussing any other

aspects including a trade-in

Compare prices from different dealers

• Let them know you have done your research and

whether their price is high.

Keys to all negotiations

• Be able to say NO

• Take the purchase to another business

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 6 – Making the

Decision

The best place to decide on which vehicle to

purchase is NOT the showroom where you are

around the dealer

• Take the information home to compare all options

After making the decision, return to the dealer to

close the sale

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 7 – Evaluating the

Decision

Think about the things which went well and what did

not

• This will be helpful the next time a similar purchase is made

If the process was successful and you are happy,

compliment the seller

If you have a complaint, make the complaint known to

the seller then move to the supervisor if necessary

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Lemon Laws

Lemon

• A vehicle in and out of the repair shop with problems

monthly

An estimated new 150,000 vehicles sold each year

are lemons.

All states have enacted lemon laws

• Specifics vary state-to-state and are in place to protect

consumers

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Lemon Laws continued

To fall under the lemon law

• New vehicle must have a substantial defect which cannot

be fixed in a reasonable time

• Defect remains unfixed after four repair attempts or the

vehicle remains in the repair shop for a total of 30 days

This allows the consumer the right to a refund or

a new vehicle

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Lemon Laws continued

What should you do if you feel you have

purchased a lemon?

• Contact the state’s attorney general office to request

information on the state’s lemon laws and how to use

them if they have purchased a lemon

• http://www.illinoisattorneygeneral.gov/consumers/lemonlaw.html

• http://www.dmv.org/il-illinois/automotive-law/lemon-law.php

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Conclusion

Before purchasing a vehicle, follow the planned buying process to avoid a costly mistake

1. Prioritize wants

2. Pre-shopping research

3. Fit the budget

4. Comparison shop

5. Negotiate

6. Make the decision

7. Evaluate the decision

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Researching An

Automobile

Lesson Objectives – Review• Assess personal transportation needs

• Perform market research to determine which vehicle options are needs versus wants

• Compare the different automobile options that are available

• Estimate the total cost of owning a vehicle

• Understand consumer rights as defined by the “lemon law”

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Researching An

Automobile

Assignments:

• Researching an Automobile worksheet 1.16.2.A1

• Part 1 – What Do I Want/Need in a Vehicle worksheet

1.16.2.A2

• Part 2 – What Types of Vehicles Fit My Needs?

worksheet 1.16.2.A3

• Part 3 – Comparison of Vehicles worksheet 1.16.2.A4

• Part 4 – Making & Evaluating a Decision worksheet

1.16.2.A5