Transportation How Will You Get There Chapter 12.

TransportationTransportationHow Will You Get ThereHow Will You Get There

Chapter 12Chapter 12

Transportation BASICSTransportation BASICS

• When do you use transportation?When do you use transportation?• Most Americans use some form of transportation Most Americans use some form of transportation

every day.every day.• You take a bus, ride in a car, walk, in-line skate, or You take a bus, ride in a car, walk, in-line skate, or

ride a bike to school.ride a bike to school.

• Local, State, and Federal Transportation Local, State, and Federal Transportation OfficesOffices• Since transportation in an important part of daily Since transportation in an important part of daily

life in the US, your local community, as well as life in the US, your local community, as well as your state and federal government, have offices your state and federal government, have offices that monitor transportation conditions.that monitor transportation conditions.

Transportation Options cont.Transportation Options cont.

• MotorcyclesMotorcycles• They are less expensive to buy and They are less expensive to buy and

maintain than a car, but can be as maintain than a car, but can be as expensive to insure as a car.expensive to insure as a car.

• More dangerousMore dangerous• Public TransportationPublic Transportation

• Most cities and suburban areas have public Most cities and suburban areas have public transportation systems.transportation systems.

• These may include buses, streetcars, These may include buses, streetcars, subways, trains, ferries, and taxissubways, trains, ferries, and taxis

Public Transportation BenefitsPublic Transportation Benefits

• CostCost• Compared to owning a car, public transportation is Compared to owning a car, public transportation is

very inexpensive.very inexpensive.

• ConvenienceConvenience• Public transportation is designed to go to the most Public transportation is designed to go to the most

popular destinations in an areapopular destinations in an area

• SpeedSpeed• Public transportation can be a faster way than cars Public transportation can be a faster way than cars

to get to your destinations to get to your destinations

• Environmental BenefitsEnvironmental Benefits

The Top 3 Financial Missteps in The Top 3 Financial Missteps in Big- Ticket PurchasesBig- Ticket Purchases

People slip up in purchasing vehicles and other People slip up in purchasing vehicles and other big- ticket items when they do the following:big- ticket items when they do the following:•Rely upon the seller as their source of Rely upon the seller as their source of information for price, financing terms, and/ or information for price, financing terms, and/ or trade- in value trade- in value •Tell a seller what they can afford to pay Tell a seller what they can afford to pay ( because the seller can then avoid disclosing ( because the seller can then avoid disclosing their lowest price)their lowest price)•Fail to complain when products fail to perform Fail to complain when products fail to perform as expectedas expected

How to Choose a CarHow to Choose a Car

• Can you afford a car?Can you afford a car?• As a general rule, you can afford a car loan As a general rule, you can afford a car loan

payment of no more than 20% of your take-payment of no more than 20% of your take-home pay.home pay.

• An average new car cost $20,000An average new car cost $20,000• A $20,000 carA $20,000 car

• $4000 down$4000 down• $16,000 at 9%$16,000 at 9%• $398.16 – Can you afford the average car.$398.16 – Can you afford the average car.

New or Used CarNew or Used Car

• Owning a new car has many Owning a new car has many advantagesadvantages• New designNew design• Bright paintBright paint• Spotless interiorSpotless interior• Improved safety or gas mileageImproved safety or gas mileage• ReliabilityReliability

• Probably the most important advantage of new Probably the most important advantage of new cars is the reliable transportation they provide.cars is the reliable transportation they provide.

New or Used Car cont.New or Used Car cont.

• CostCost• A new car is much more expensive that the A new car is much more expensive that the

same car bought used.same car bought used.• As soon as you drive a new car off the lot, it As soon as you drive a new car off the lot, it

looses value.looses value.

• MileageMileage• The value of a used car depends on the The value of a used car depends on the

number of miles it has traveled.number of miles it has traveled.• Its mileage, indicated in the car’s Its mileage, indicated in the car’s

odometer.odometer.

How to choose a carHow to choose a car

• What Class of CarWhat Class of Car• Economy carsEconomy cars• Midsize carsMidsize cars• Full-size carsFull-size cars• Luxury carsLuxury cars• Sport utility vehiclesSport utility vehicles• VansVans• Sports carsSports cars• Pick-up trucksPick-up trucks

How to choose a car cont.How to choose a car cont.

• Which model?Which model?• Features and optionsFeatures and options

• What are most importantWhat are most important• Air conditioningAir conditioning• SunroofSunroof• ConvertibleConvertible• Automatic or ManuelAutomatic or Manuel• Cruise controlCruise control• Leather interiorLeather interior• Power locksPower locks


• Dealer Add-onsDealer Add-ons• Rust-proofingRust-proofing• Paint sealersPaint sealers• Stain resistantStain resistant

• Extended WarrantyExtended Warranty• Basic is 3 years 36,000 milesBasic is 3 years 36,000 miles• Can pay $1000 to have this extended to 7 Can pay $1000 to have this extended to 7

and 70,000 milesand 70,000 miles


• Safety FeaturesSafety Features• Size alone does not make a car saferSize alone does not make a car safer• Check consumer reports about crash testCheck consumer reports about crash test• AirbagsAirbags• Antilock brakes are not reducing accidents, Antilock brakes are not reducing accidents,

you can make your car safer if you learn to you can make your car safer if you learn to use them correctly.use them correctly.

How to evaluate a carHow to evaluate a car

• Has it been wrecked?Has it been wrecked?• Check for rust.Check for rust.• Look for stainsLook for stains• Look on ground under car for leaksLook on ground under car for leaks• Check all controls and lightsCheck all controls and lights• Is the car aligned properlyIs the car aligned properly• Do brakes work properlyDo brakes work properly• Gears shift smoothlyGears shift smoothly• Look for blue smoke coming out of tailpipe, Look for blue smoke coming out of tailpipe,

this means it is burning oil.this means it is burning oil.• Take it to be checked out by a mechanic.Take it to be checked out by a mechanic.

Choosing Between Low- Interest- Rate Dealer Choosing Between Low- Interest- Rate Dealer Financing and a Rebate Advertisements for new Financing and a Rebate Advertisements for new vehiclesvehicles

• Suppose a dealer offers 2.9 percent Suppose a dealer offers 2.9 percent financing for three years with a $ 907 financing for three years with a $ 907 finance charge; alternatively, you can finance charge; alternatively, you can receive a $ 3000 rebate if you arrange receive a $ 3000 rebate if you arrange your own financing. The price of the car your own financing. The price of the car before the rebate is $ 22,000. Assume before the rebate is $ 22,000. Assume you can make a $ 2000 down payment you can make a $ 2000 down payment and that you can get a 6.5 percent loan and that you can get a 6.5 percent loan on your own. on your own.

WorksheetWorksheet

To buy or lease?To buy or lease?

• Finance optionsFinance options• Dealers offer low interest rates or a Dealers offer low interest rates or a rebaterebate, ,

a partial refund of the purchase price.a partial refund of the purchase price.• LeasingLeasing, or renting, is a relatively new way , or renting, is a relatively new way

to purchase a carto purchase a car• The price of new automobiles went up rapidly in The price of new automobiles went up rapidly in

the 70’s and 80’s.the 70’s and 80’s.• Leasing was promoted as a way for people to Leasing was promoted as a way for people to

buy the use of more expensive cars.buy the use of more expensive cars.

• About 20% of news cars bought are About 20% of news cars bought are actually leases actually leases

Lease TermsLease Terms

• Gross capitalized cost.Gross capitalized cost.• This is the price you would pay for the car This is the price you would pay for the car

and you should negotiate it just as if you and you should negotiate it just as if you were buying it.were buying it.

• Capitalized cost reductionCapitalized cost reduction• This is the cash down payment.This is the cash down payment.

• Acquisition FeeAcquisition Fee• This is the cost of setting up a lease. It often This is the cost of setting up a lease. It often

includes a security costincludes a security cost

Lease Terms cont.Lease Terms cont.

• Residual ValueResidual Value• This is the predicted value of the car at the end of This is the predicted value of the car at the end of

the lease.the lease.

• Money factorMoney factor• This is an indication of the interest rate that you This is an indication of the interest rate that you

would pay for financingwould pay for financing

• Monthly PaymentMonthly Payment• This is the amount you will pay each month during This is the amount you will pay each month during

the lease.the lease.

Lease Terms cont.Lease Terms cont.

• Mileage allowanceMileage allowance• This is the number of miles you will be allowed to This is the number of miles you will be allowed to

drive the car without paying an extra charge per drive the car without paying an extra charge per mile.mile.

• Excess wear feeExcess wear fee• This is an amount charged for damage to the car This is an amount charged for damage to the car

that is beyond that which could reasonably be that is beyond that which could reasonably be expected.expected.

• Disposition feeDisposition fee• This is the amount that is paid when the car is This is the amount that is paid when the car is

returned at the end of the lease. Covers getting returned at the end of the lease. Covers getting the car ready to sell again.the car ready to sell again.

Steps to LeasingSteps to Leasing

• Negotiate the PriceNegotiate the Price• Know the Residual ValueKnow the Residual Value

• If the residual value is 60%, then the If the residual value is 60%, then the leasing business is guaranteeing that the leasing business is guaranteeing that the value of the car will be at least 60% of its value of the car will be at least 60% of its current value at the end of the lease. You current value at the end of the lease. You pay the other 40%.pay the other 40%.

• Down Payment and Security Deposit.Down Payment and Security Deposit.

Open & Closed-End Lease Open & Closed-End Lease

•A lease may be either open end or closed A lease may be either open end or closed end. end.

•In an open-end lease, you must pay any In an open-end lease, you must pay any difference between the projected residual difference between the projected residual value of the vehicle and its actual market value of the vehicle and its actual market value at the end of the lease period. When a value at the end of the lease period. When a vehicle depreciates more rapidly than vehicle depreciates more rapidly than expected, the holder of an open-end lease expected, the holder of an open-end lease has to pay extra money when the lease has to pay extra money when the lease expires. expires.


• For example, a vehicle with an $ 11,000 For example, a vehicle with an $ 11,000 residual value but a $ 10,250 market value residual value but a $ 10,250 market value would require an end- of- lease payment of $ would require an end- of- lease payment of $ 750 ($ 11,000 $ 10,250). 750 ($ 11,000 $ 10,250).

• The Consumer Leasing Act limits this end- of- The Consumer Leasing Act limits this end- of- lease payment to a maximum of three times lease payment to a maximum of three times the average monthly payment. the average monthly payment.


• Most vehicle leases are closed- end leases. Most vehicle leases are closed- end leases. • In a closed- end lease ( also called a walkaway In a closed- end lease ( also called a walkaway

lease), the holder pays no charge if the end-of-lease lease), the holder pays no charge if the end-of-lease market value of the vehicle is lower than the market value of the vehicle is lower than the originally projected residual value.originally projected residual value.

• However, closed- end leases may carry some type of However, closed- end leases may carry some type of end- of- lease charge if the vehicle has greater than end- of- lease charge if the vehicle has greater than normal wear or ex-cess mileage. For example, a four- normal wear or ex-cess mileage. For example, a four- year closed- end lease might require a $ 0.30 per year closed- end lease might require a $ 0.30 per milemile

Steps to LeasingSteps to Leasing

• PaymentPayment• Before you return the carBefore you return the car

• Get it checked outGet it checked out

• Return your lease car.Return your lease car.

Who should consider a lease?Who should consider a lease?

• You should not lease a car ifYou should not lease a car if• You can pay cash for the new car you wantYou can pay cash for the new car you want• Drive many miles each yearDrive many miles each year• Keep your car for many yearsKeep your car for many years• Are particularly hard on your carsAre particularly hard on your cars

The Finance and Insurance OfficeThe Finance and Insurance Office

• FinancingFinancing• If you get it through the dealership then If you get it through the dealership then

they will add an extra percent or two to the they will add an extra percent or two to the rate.rate.

• InsuranceInsurance• Accidental death and DismembermentAccidental death and Dismemberment

• Pays off you loanPays off you loan

• Gap protectionGap protection• Pays the differencePays the difference

You Must Be Kidding, Right!You Must Be Kidding, Right!

When Ryan Levelle graduated from college three years When Ryan Levelle graduated from college three years ago, he really wanted a fully equipped Honda Civic. His ago, he really wanted a fully equipped Honda Civic. His monthly payment would be about $ 350 per month, monthly payment would be about $ 350 per month, about $ 70 more than he could afford. So that Ryan about $ 70 more than he could afford. So that Ryan could meet his budget, the dealer suggested that he could meet his budget, the dealer suggested that he lease the vehicle and offered a the vehicle and offered lease the vehicle and offered a the vehicle and offered a 42- month lease option at $270 per month with a a 42- month lease option at $270 per month with a driving maximum of 12,000 miles per year. The driving maximum of 12,000 miles per year. The contract had a $0.30 per mile fee at the end of the contract had a $0.30 per mile fee at the end of the lease for any excess mileage. Now, with six more lease for any excess mileage. Now, with six more months on his lease, Ryan is already 1500 miles over months on his lease, Ryan is already 1500 miles over the 42,000 (3.5 x1 2,000) mileage limit in his contract. the 42,000 (3.5 x1 2,000) mileage limit in his contract. What is Ryan’s best option at this point? What is Ryan’s best option at this point?

ChoicesChoices

A.A. Turn back the vehicle now and pay the $ 450 ( 1500 Turn back the vehicle now and pay the $ 450 ( 1500 x $0.30) for excess mileage.x $0.30) for excess mileage.

B.B. Try to cut back on his driving to minimize his excess Try to cut back on his driving to minimize his excess mileage fee, which could be higher than $2500 if he mileage fee, which could be higher than $2500 if he keeps driving at the same rate as he has been.keeps driving at the same rate as he has been.

C.C. Stop driving the car and pay $450 for excess Stop driving the car and pay $450 for excess mileage when he turns it back at the end of the mileage when he turns it back at the end of the lease.lease.

D.D. Continue driving the vehicle and buy it at the end of Continue driving the vehicle and buy it at the end of the lease by paying the residual value agreed upon the lease by paying the residual value agreed upon when he entered into the contract. when he entered into the contract.

The answer is D. None of the other The answer is D. None of the other options is financially practical. Ryan options is financially practical. Ryan learned a hard lesson. Leases require a learned a hard lesson. Leases require a lower monthly payment but have hidden lower monthly payment but have hidden costs that often are not known until the costs that often are not known until the very end of the contract!very end of the contract!


• InsuranceInsurance• Extended Warranty protectionExtended Warranty protection

• Extends the manufacturing warrantyExtends the manufacturing warranty

• Optional ProductsOptional Products• Rust protectionRust protection• Security systemSecurity system


• Sales contractSales contract• Cash PriceCash Price

• Should be the same that you negotiatedShould be the same that you negotiated

• Down PaymentDown Payment• Unpaid Cash BalanceUnpaid Cash Balance• Insurance PremiumsInsurance Premiums• Other CostOther Cost


• The Sales Contract cont.The Sales Contract cont.• Principal Amount FinancedPrincipal Amount Financed• Finance ChargeFinance Charge• Total Cost of the LoanTotal Cost of the Loan• Payment SchedulePayment Schedule

Decision Making ProjectDecision Making Project

• Get a partnerGet a partner• Have your partner list of needs and Have your partner list of needs and

wants.wants.• What features do they want?What features do they want?• You partner has a transportation budget You partner has a transportation budget

of $350 per month and $1000 in of $350 per month and $1000 in savings.savings.

• You need to have 3 different choices for You need to have 3 different choices for your partner to choose from.your partner to choose from.

The Car-buying ProcessThe Car-buying Process

• Determine a Fair PriceDetermine a Fair Price• The invoice priceThe invoice price

• The amount the dealer paid to buy the car from The amount the dealer paid to buy the car from the manufacturerthe manufacturer

• Online sourcesOnline sources• Consumer ReportsConsumer Reports• Kelley Blue BookKelley Blue Book• Edmund’sEdmund’s• Microsoft CarPointMicrosoft CarPoint


• Sticker PriceSticker Price• The manufacturer’s suggested retail price. The manufacturer’s suggested retail price.

(MSRP)(MSRP)• It is almost always higher then what the It is almost always higher then what the

dealer expects the customer to pay.dealer expects the customer to pay.


• How to Calculate a Fair PriceHow to Calculate a Fair Price• A fair profit is about 3% of the invoice price.A fair profit is about 3% of the invoice price.

• Take invoice priceTake invoice price• Add all the options you wantAdd all the options you want• Subtract any rebatesSubtract any rebates• Add 3%Add 3%

• Your Trade InYour Trade In• Determine its value before you take it in.Determine its value before you take it in.


• Where to shopWhere to shop• Don’t go to one dealerDon’t go to one dealer• No-Haggle DealersNo-Haggle Dealers• Buying on the net.Buying on the net.

• Some online places will negotiate with local dealers.Some online places will negotiate with local dealers.

• When to shopWhen to shop• End of the monthEnd of the month• Beginning of a new model year, usually SeptemberBeginning of a new model year, usually September


• Test DriveTest Drive• Examine firstExamine first• Then driveThen drive

• How to Negotiate the DealHow to Negotiate the Deal• Make your first optionMake your first option• Your next offer should be a bit higherYour next offer should be a bit higher• Final PriceFinal Price

• Sales TaxSales Tax• Destination FeeDestination Fee• License and registrationLicense and registration• Documentation Fee (No more than $50 to $100)Documentation Fee (No more than $50 to $100)

How to Maintain a CarHow to Maintain a Car

• Maintenance every car needsMaintenance every car needs• Your owners manualYour owners manual• Maintenance scheduleMaintenance schedule

• Routine Preventive TasksRoutine Preventive Tasks• TiresTires

• Properly inflatedProperly inflated

• OilOil• The dipstickThe dipstick


• Other FluidsOther Fluids• Transmission FluidTransmission Fluid• Brake FluidBrake Fluid

• Tune-upsTune-ups• Replace Spark Plugs, Air filter, fuel filter, and Replace Spark Plugs, Air filter, fuel filter, and

other partsother parts

• BrakesBrakes• Last about 40,000 milesLast about 40,000 miles


• Other routine checksOther routine checks• Every couple of months check belts and hosesEvery couple of months check belts and hoses

• Exterior MaintenanceExterior Maintenance• Wash regularly with mild soapWash regularly with mild soap• At least once a year apply waxAt least once a year apply wax

Repair ServicesRepair Services

• How to choose a repair shopHow to choose a repair shop• Check them outCheck them out

• Better Business BureauBetter Business Bureau• Posted Training Certificates (ASE)Posted Training Certificates (ASE)

• Build a relationshipBuild a relationship• Let them know you will continue doing business Let them know you will continue doing business

with themwith them

• Cars that break down all the time are called Cars that break down all the time are called lemons.lemons.

Repair shopsRepair shops

• Doing business with a repair shopDoing business with a repair shop• Describe the problemDescribe the problem• Get an EstimateGet an Estimate• Ask about guaranteesAsk about guarantees• Check and Pay for RepairsCheck and Pay for Repairs

• Where parts rebuilt or repairedWhere parts rebuilt or repaired

Transportation How Will You Get There Chapter 12.

Documents

form of transportation

transportation conditions

transportation basics

transportation options

areapublic transportation

public transportation

car loan payment

average new car cost