Hidden Costs
Name two costs of owning a car besides the monthly loan payment.
insurance, gas/electricity, maintenance and repairs, registration and taxes, or depreciation.
You have $1,100 per month for all car expenses. Insurance is $142 and maintenance plus fuel is $300. How much is left for the car payment?
$658. Calculation: $1,100 − $142 − $300 = $658.
What does APR stand for?
Annual Percentage Rate.
True or false: The advertised price is always the final price you'll pay.
False. Taxes, fees, and optional add-ons may increase the final price.
A dealer adds window tint, wheel locks, and a GPS system. Are these usually must-haves or nice-to-haves?
Nice-to-haves. Consider whether each add-on is necessary and worth the extra cost.
Your planned car payment is $600, but your budget only leaves $500 after insurance, fuel, and maintenance. What should you reconsider?
The vehicle price or financing terms or whether the purchase fits your budget. Don't ignore the other ownership costs.
What are two things you should compare when looking at auto loans?
APR/interest rate, loan term, fees, monthly payment, and total amount repaid. Any two.
You see a fee in the contract that you don't understand. What should you do before signing?
Ask what it is, review the contract, and don't sign until you understand and agree with the terms.
A car's advertised price is $36,000, but the final purchase total is $37,375. Name two items that could explain the difference.
dealer fees, title or registration fees, taxes, or add-ons
Name three costs you should include in a realistic monthly car budget besides the loan payment.
Examples: insurance, fuel/electricity, maintenance and repairs, and registration/taxes.
Two loans are for the same amount at the same APR. One has a longer term. Which generally has the lower monthly payment and which generally costs more total interest?
The longer-term loan generally has the lower monthly payment but costs more total interest over the life of the loan.
A dealer offers a high trade-in value but won't clearly show the price of the new car. What should you ask for?
Separate figures for the vehicle's purchase price, each fee/add-on, and the trade-in value.
Why should you consider depreciation when budgeting for a vehicle?
A vehicle generally loses value over time, which affects its overall cost and what it may be worth when you sell or trade it in.
You can afford the monthly payment only if you skip setting aside money for repairs. Is this a comfortable budget? Why or why not?
No. Repairs are a predictable possibility; a realistic budget should account for maintenance and unexpected costs.
What is the difference between direct lending and dealership financing?
Direct lending means getting the loan from a financial institution. Dealership financing is arranged through the dealer at the time of purchase.
Name two things you can negotiate when buying a car.
The total vehicle price and financing terms such as APR and loan term
A salesperson says the add-ons are already installed, so you should accept them without question. What should you do?
Ask for an itemized total, decide which items you actually want, and negotiate or decline optional add-ons when possible.
Your maximum car payment is $658. A dealer offers $625 per month, but insurance is $40 more than you estimated. What does that mean for your budget?
The payment plus revised insurance is $665 above the $658 limit, even before considering other changes. Rework the budget or choose a less expensive option
A dealer focuses only on a low monthly payment. Name three loan details you should check before agreeing.
APR, loan term, total finance charge/interest, fees, and total amount to be paid. Any three.
The salesperson says, 'This deal is only good right now, sign before reading everything.' What's the safest response?
Take time to read and verify the entire contract. Don't sign anything that is incorrect or unclear.