9.1 Purchasing a Vehicle
The total price of a vehicle, including base price, options, and destination charge.
Sticker Price
The price actually paid for a vehicle by a dealer, usually expressed as a percent, which is less than the sticker price.
Dealer's Cost
Value based on the trade-in value of hundreds of cars of that particular model.
Average Wholesale Value
A risk-sharing plan to reduce or minimize the impact of financial loss.
Insurance
Vehicle costs that increase the more you drive, such as gasoline and tires.
The price of a vehicle’s engine, chassis, and any other standard equipment for a particular model.
Base Price
A hatchback’s base price is $10,249. The options total $910. The destination charge is $495. Dealer pays about 93.5 percent of base price and 77 percent of options.
What is the dealer’s cost?
$10,778.52
Value higher than the wholesale value and is based on the prices customers pay.
Average Retail Value
Required by law: Financial protection against accidents that cause bodily injury and property damage.
Liability Insurance
Costs that remain the same no matter how much you drive, such as vehicle insurance and registration fees.
Fixed Costs
The Jordans are shopping for a new vehicle. They are pricing a 4-door sedan. The base price is listed at $19,500. Factory-installed options total $1,395. The destination charge is $385. What is the sticker price?
a. $17,720.00
b. $19,885.00
c. $20,895.00
d. $21,280.00
D. $21,280
A convertible’s base price is $25,495. The options total $800. The destination charge is $485. Dealer pays 90 percent of base price and 86 percent of options.
What is the dealer’s cost?
$24,118.50
Minivan.
Average retail value is $13,375.
Add $500 for left sliding door.
Add $175 for power seat.
Add $375 for rear air conditioning.
Deduct $175 without cruise control.
Deduct $125 without tilt wheel.
No adjustment for mileage.
What is the average price?
$14,125
Insurance protection from losses due to fire, vandalism, theft, and other causes.
Comprehensive Insurance
A decrease in the value of a vehicle because of its age and condition.
This falls under the category of fixed costs.
Formula: New Car Price - Current Worth / Years Old
Depreciation
Sports utility vehicle.
Base price: $26,630.
Options: power sunroof $704; supplemental side airbags $431; security alarm $132.
Destination charge: $625.
What is the sticker price?
$28,522
Fred and Mary Merrill want to purchase a new car. The car has a base price of $16,700, options totaling $1,095, and a destination charge of $325. They read in a consumer magazine that the dealer's cost for the car is 90 percent of the base price and 87 percent of the options price. What should they estimate as the dealer's cost?
a. $15,764.40
b. $15,806.65
c. $16,275.15
d. $16,307.65
d. $16,307.65
Two-year-old minivan: Average retail value= $8,975; add $1,250 for all-wheel drive; add $750 for air conditioning; deduct $500 for manual transmission.
$10,475
Driver-rating factor: 2.0.
Age, rating group: C, 15.
Coverage: 300/300 bodily injury, $100,000 property damage, $50-deductible comprehensive, and $50-deductible collision.
What is the annual base premium?
What is the annual premium?
(USE CHART on 9.4)
Annual Base Premium: $720.80
Annual Premium: $1,441.60
Kim Misawa drove her vehicle 13,000 miles.
Fixed costs totaled $2,693.
Variable costs totaled $1,471.
What was the total annual cost?
What was the cost per mile?
Total annual cost: $4,164
Cost per mile: $0.32 per mile
Sports car.
Base price: $19,015.
Options: Sport appearance package $1,224; power seats $246, premium sound system $319; removable hatch roof panels $905.
Destination charge: $600.
What is the sticker price?
$22,309
Why would we care about the dealer cost?
The dealer's cost is good to know in order to determine how much over this cost you are being asked to pay when buying a vehicle.
One-year-old convertible: Average retail value = $14,876; add $300 for CD player; deduct $550 for excessive mileage.
$14,626
Jason Edwards drives his car to and from work and for pleasure. His driver-rating factor is 2.50. He has $50-deductible comprehensive, $50-deductible collision, 50/100 bodily injury, and $50,000 property damage insurance. His vehicle is classified as D, 14.
What is his annual base premium?
What is his annual premium?
(USE CHART on 9.4)
Annual base premium: $607.60
Annual premium: $1,519
Kim Leung drove his SUV 11,500 miles.
Fixed costs totaled $3,343.
Variable costs totaled $1,511.
What was the total annual cost?
What was the cost per mile?
Total annual cost: $4,854
Cost per mile: $0.42 per mile