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Managing your Personal Managing your Personal Finances Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1
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Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Dec 24, 2015

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Cecil Shepherd
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Page 1: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Managing your Personal Managing your Personal FinancesFinances

Unit 3 : Getting Your First CarCash vs. Loan vs. Lease

1

Page 2: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

DO NOW:

What are some different ways that individuals pay for automobiles?

What can happen if you borrow money and you are not able to make the monthly payment on a car?

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Page 3: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Standards

3.1 Students will be able to analyze and apply multiple sources of financial information when making financial decisions about automobile purchases.

3.2 Students will understand the costs and benefits associated with attaining a car for cash, loan, and lease.

3.3 Students will understand the components and costs of car insurance and explain the importance of protection against financial loss.

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Page 4: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lesson Goals I can compare the advantages and disadvantages

of owning a car using cash, loan or lease. I can use a loan calculator to determine the cost of

a car loan. I can compute the costs of buying a car with cash,

loan and lease to help me make educated financial decisions about automobile purchases.

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Page 5: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

DO NOW:

What do already know the advantages and disadvantages of :

Paying Cash for a car Taking out a Loan to buy a car Taking out a Lease on a new vehicle

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Page 6: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Do Now(Answer)

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Page 7: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Cash Pros Pride of ownership: you own the car (the car is in your name…not the bank’s or the dealership’s name)

Car buying is more economical in the long run

No penalty for driving excess mileage

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Page 8: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Cash

Pros Increased flexibility-you can easily sell the car

whenever you want alter it as you wish Easier to negotiate a better price on the car

when you have the $$s No interest to pay No car loan payments (you can begin to save

toward next car or for a rainy day)

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Page 9: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Cash

Cons You’re responsible for maintenance costs (once the warranty expires)

Trade-in or selling hassles when you try to sell your car

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Page 10: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Cash

Cons More of your ready cash is tied up in the car (which depreciates) rather than an investment that appreciates.

Leaves you with limited funds for a rainy day or to purchase other needs and wants.

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Page 11: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Cash

Pros and Cons What do you see as the biggest Pro and Con of paying cash for your vehicle?

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Page 12: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Write your Questions

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Page 13: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Loan/Finance

Pros Enables you to own a new car

without the total “upfront” cost; all you usually need is a $4,000-$6,000 down payment

Allows you to own a car after paying a monthly rate for a set period of time.

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Page 14: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Loan/FinancePros

You can get a loan through an automaker, credit union (more on credit unions later), or a bank. “Only” need $4,000 - $6,000 down payment

You can take advantage of good car interest rates (even zero-percent interest rates)

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Page 15: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Loan/Finance

Cons Most loans require interest to be

paid back as part of monthly payment (if your credit is not good, it might be tough to get a loan with a favorable terms)

Car payments for 48 – 72 months

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Page 16: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Loan/FinanceCons

Financing often requires a down payment; usually between 10-15% of the total loan

Harder to sell car (need to pay off loan first) More complicated negotiation Loan holder might require more insurance

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Page 17: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Loan/Finance

What do you see as the biggest pro and con of financing to purchase a new vehicle?

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Page 18: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease

Pros You can drive a new car now

without having to pay the whole cost at once

Lower monthly payment Usually need a smaller down

payment18

Page 19: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease

Pros Lower repair costs (warranties

usually cover most repairs) No trade-in hassles at the end of the

lease You pay sales tax on only a portion

of the car you finance

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Page 20: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease

Cons You don’t own the car at the end

of the lease Your mileage is limited to a set

amount (usually 12,000-15,000 per year)

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Page 21: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease

Cons Lease contracts are confusing Have a car payment for term of

lease only Can’t sell car at end of the lease

(it is not your car) More complicated negotiation

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Page 22: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease

Cons Lease holder might require more

insurance Might incur penalties for damage

or other wear and tear to the car Costly to terminate a lease earlier

than lease period

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Page 23: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease

What is the main difference versus a loan when leasing a vehicle?

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Page 24: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lease?

Let’s look at the numbers…

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Loan?

Cash?

Page 25: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Access Bankrate’s Loan Calculator at www.bankrate.com/calculators/mortgages/loan-

calculator.aspx to confirm our loan amounts:

 

Car #1: Loan for Ford Escape: $19,955 for 48 months at 6%.

Monthly payment $____________________ 

Car #2Loan for Jeep Wrangler: $27,420 for 48 months at 6%.

Monthly payment$___________________ 

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Using a Loan Calculator

Page 26: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Extra Credit:

Use the following formula to manually calculate loans for Car 1 and Car 2. (Remember to show your work.

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Page 27: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Lesson Goals I can compare the advantages and disadvantages

of owning a car using cash, loan or lease. I can use a loan calculator to determine the cost of

a car loan. I can compute the costs of buying a car with cash,

loan and lease to help me make educated financial decisions about automobile purchases.

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Page 28: Managing your Personal Finances Managing your Personal Finances Unit 3 : Getting Your First Car Cash vs. Loan vs. Lease 1.

Ticket Out the Door

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What did you learn from this lesson?

What surprised you?