Transportation and Automobile Expenses Flashcards
Depreciate
the value of something decreases as it gets older
Warranty
a contract that promises to fix or replace broken problems on a product
Finance
borrowing money over an extended period of time
Credit rating
a rating that describes your borrowing and payment history- assesses how big of a risk you are to receive a loan
Consumer report
a report that describes the strengths and weaknesses of a particular product
What are some questions to consider when deciding what car to buy?
How long do you plan to own the car?
What type of car do you need? (SUV vs. compact car, sports car vs. basic transportation, new vs. used)
Will you buy or lease the car?
Will you pay cash (out of pocket) or finance the car?
Where are the best places to research your options for cars?
Visit local dealerships (test drive cars, look at different interiors, etc.)
Consumer reports (how well does the car preform?)
Ask around (What cars are generally preferred by the people in your life?)
What are some pros and cons of a new car?
Average new car loses 20% of it’s value the second you drive it off the lot. Your new $40,000 car is worth $32,000 the next day.
New cars have less repair problems and come with better warranties than used cars.
What are some pros and cons of a used car?
Cheaper for the same model
Depreciate less rapidly
More expensive to buy from a dealer, but may have less repair problems and a better warranty than buying privately
Try to find out why the former owner is selling it
Take it to a mechanic before buying- if the owner resists, walk away
When would it be a good idea to pay cash for a car?
Cash generally is great. Consider paying cash if you are buying an older car: you wouldn’t want to finance something that is going to depreciate greatly in value or that could fall apart before it’s paid off.
What is a pro of financing a car?
It is a good way to establish your credit rating. You can buy it with a loan or finance it.
What makes up a car loan?
Down payment (what you can afford to pay now) and your monthly payment (max of 20% of your monthly net income)
What is the formula to calculate a loan payment?
P(r/12) / (1-(1+(r/12))^-m)
P= principal, or the amount you must borrow
r= annual rate of interest (as a decimal)
m= number of monthly payments (take years x 12)
How much would your monthly payment be if the car costs $32,000, you want a 3 year loan, and the interest rate is 9% per year?
32,000(0.09/12) / (1-(1+(0.09/12))^-36)
= $1017.81 per month
Tags
the license plate on each vehicle
Maintenance
a plan to keep a car running and working smoothly
Inspection
a yearly look over of the car to make sure that all parts work correctly and are safe
Title
ownership papers for a vehicle
Registration
a notification with your state that logs your vehicle’s important data to keep records of cars bought and sold; must be renewed annually in PA
Expenses at the time of purchase include:
Registration fees, sales tax, title, tag
How often should you change your car’s oil?
Oil changes are recommended for every 3000 miles or every 3 months. This generally costs about $20-30 if you go to a mechanic.
What can you expect to spend on gas?
The average car in the US has a capacity of 19 gallons in the tank, and each gallon runs you an average of $3.50. How much you pay for gas will vary state by state, car by car, and by how much you drive.
How often should you add wiper fluid to your car?
Wiper fluid generally needs to be added every 3 months. A gallon of wiper fluid costs on average $4.
What are other monthly financial factors one must consider when they buy a car?
Insurance costs: average is about $140 a month but it varies based on the individual
Monthly payment if you borrowed money to get the car
Paying a mechanic to fix any unexpected problems
How often do you need to get your car inspected?
Once a year, the average cost is about $37 (if it passes inspection).
What percentage of your total expenditure can you expect to be for car related expenses?
About 15%.
