PFM - Chapter 4, Lesson 5 Flashcards
Two ways to finance a car:
1) Direct Financing (a loan)
2) Leasing
Are any of these ways good?
NO; they both get you into debt.
If you use credit to buy, or finance, a car, you
end up making much more than the sticker price
A car loan payment is determined by three things:
1) Principal
2) Interest
3) Term
Principal
The total amount of the loan—the cost of the car plus any fees and taxes.
- The total amount borrowed before interest
Interest
The additional cost a lender charges for borrowing their money.
Term
The amount of time, in months, that you’ll be making payments.
- The more time you have, the lower the payments will be (but you’ll pay more interest), and vice versa.
What is the best way to buy a car?
With cash!
Negative Equity
The value of the asset falls below what is owed on it.
Depreciation
The loss of value of an asset over time.
What is the most expensive way to drive a car?
Leasing It
What does your typical lease payment also include?
1) A rental charge
2) Taxes
3) Fees
You can buy a car at the end of a lease, but this means that you will….
pay even more to actually buy the car.
Lease agreements come with a mileage __________.
Cap
What happens if you go over this cap?
You must pay a fee.
