6.02 Essential Questions

1. OBJECTIVE 6.00Understand shopping options and practices for meeting consumer needs.6.02 Students will understand options and practices for meeting transportation needs.

2. 6.02 Essential Questions • What are the options for meeting transportation needs? • How can consumers make wise decisions when shopping for transportation needs? • Setting priorities • Doing the research • Leasing/purchasing vehicle • Obtaining insurance

3. Decision Making Time:Steps in meeting transportation needs • 1. Consider options for transportation needs • 2. Set priorities • 3. Do the research • 4. Obtain automobile insurance

4. Step 1. Consider options for transportation needs • Public transit • Taxicabs • Walking, bicycling • Motorcycle, moped • Carpooling • Purchase/Lease of a vehicle • Which options are available in your area? • Which options fit your personal needs in short term or long term? • Which options are within your budget?

5. Step 1. Consider options for transportation needs • Public transit • Widely available in cities, costs less than owning a vehicle, no responsibilities • Taxicabs • Convenient, but very costly; may be difficult to find in some situations • Walking, bicycling • Economical choice for short distances; less protection in foul weather

6. Step 1. Consider transportation options • Motorcycle, Moped • Convenient, less expensive to buy and operate, conserves energy, requires less parking area, easy to maneuver, high accident/injury rate, especially on major highways or in heavy traffic • Carpooling • Economical when convenient, saves energy, parking problems, reduces traffic, requires some rearrangement of personal schedule • Purchase/Lease of Vehicle • Convenient, costs more in energy, required parking, heavier traffic, maintenance costs, insurance expenses, property taxes, investment

7. Our Area • Since the community we live in has limited opportunitiespublic transportation, taxi services, & walking opportunities, we will primarily deal with leasing or purchasing a private passenger vehicle.

8. Question? A disadvantage of this mode of transportation is that costs are higher than other modes. A. Bicycling B. Carpooling C. Public transit D. Taxicabs

9. vehicle purchase/leaseStep 2-Set priorities • Make a list of wants and needs for a vehicle • Take into consideration: • What you can afford? • Where and when it will be used? • Who will be driving the vehicle? • Whether to purchase an automobile, truck, motorcycle, or van

10. Question? Nicole is listing features she wants and needs in her new car. Which step in meeting transportation needs is this? A. List transportation options B. Set priorities C. Do the research D. Obtain automobile insurance

11. Step 3. Do the research • Research Used vs. New vehicles • Used vehicle---often good option for first-time buyers because fits budget needs • Depreciates more slowly and costs less to insure • Look for one-to-two-year-old vehicle • Check “Buyers Guide” sticker on window • Slightly used vehicles may still have factory/dealer warranty; others have no warranty • Look out for defects -disclosure sheet- describes repairs/replacements done; if car has been in an accident- may need to have vehicle inspected by an independent technician • Ask about previous owner and maintenance records • Research performance, safety & service records for make & model on internet • Superstores, dealers and manufacturers sell “certified used cars”-have received thorough mechanical and appearance inspections, & necessary repairs and replacements • Check Official Used Car Guide and Kelly Blue Book for info on used vehicles

12. Question? An advantage for a first-time buyer of buying a used car instead of a new one is that used cars: A. are less likely to need repairs and replacements. B. are more likely to be affordable for younger buyers. C. decrease in value more quickly than new cars. D. may have been involved in prior accidents.

13. Step 3. Do the research • Research Used vs. New vehicles • New vehicle---the challenge is to find a vehicle to match one’s needs, wants, and budget • Choice of features for safety, performance , economy, appearance & convenience • Choose between domestic and imported • Standard features at no extra charge • Extra features add significantly to cost • Custom vehicles can be ordered from factory

14. Question? Sally bought her new car from a dealer that represented Ford manufacturers. Which is MOST LIKELY true of Sally’s new car? A. Was bought from a traditional dealership B. Was bought on Internet auction C. Will not have a warranty D. Will only be available for leasing, not buying

15. Step 3. Do the research • Research where to buy • Traditional dealership-represents one or two manufacturers, selling new and/or used • Auto superstores sell new & used vehicles from huge inventories • Private sellers, classified ads, & auctions sell “AS IS”, no warranty

16. Question? Nate is comparing motorcycles and services available at a small local dealership with those in a much larger city dealership. Which type of research for a vehicle purchase is this? A. Researching options for financing B. Researching prices C. Researching used vs. new vehicles D. Researching where to buy

17. Step 3. Do the research • Research makes and models • What are important factors to consider? • Safety- brakes, airbags, head restraints • Reliability-check consumer magazines and Internet for quality and reliability marks • Fuel economy-type of fuel used and miles per gallon • Power & performance-acceleration, handling, braking, & acceleration • Comfort & convenience-headroom, legroom, & storage for cargo • Insurance-rates vary according to data tables on repair costs of various models • Warranties-generally provide for repair/replacement of defective parts during warranty period

18. Question? When researching makes and models of trucks, Andy checked trucks for headroom, legroom, and seating. Which factor to consider when buying vehicles is this? A. Comfort and convenience B. Fuel economy C. Power and performance D. Reliability

19. How to compare MPG http://www.fueleconomy.gov/feg/printguides.shtml • New Vehicles- vehicle specific information required by the EPA • Used Vehicles-general information on internet, but may not be the exact model with features, not required by EPA Actual mileage will vary with options, driving conditions, driving habits, and vehicle condition

20. Step 3. Do the research • Research prices • Used vehicles---book value is the estimated value of a given make, model and model year • When purchasing a used car “as is”, I will not have a warranty. • New vehicles---advantage of buying a new vehicle is they have more features • *Invoice price-price the dealer pays the manufacturer • *Base price- the price of a vehicle with stand equipment • *Options and option package-features available at extra cost • *MSRP-Manufacturers Suggested Retail Price - base price +price options installed by manufacturer+ manufacturers transportation price (one dealer to another) • *Sticker price-dealer’s initial asking price as found on the sticker on the window

21. Question? Joey discovered that features like leather seats, sun roof and special rims are available on new cars at an extra cost. Which type of pricing is this? A. Base price B. Book value C. Invoice price D. Options and options packages

22. Step 3. Do the research • Leasing Vs. Purchasing Leasing: monthly payments in exchange for exclusive use of vehicle for a specified period of time; like renting • Research options for financing • Acquisition fee • Capitalized cost---price for the leased car, financed amount • Capitalized cost reduction---similar to down payment, rebate, or trade in credit; results in lower monthly payment • Lease term- length of contract, usually 24, 36 or 48 months • Up front costs-made when signing lease---includes deposit, taxes, and registration fees • Residual value-worth of vehicle end of lease; higher residual = lower payments • Monthly payments-made by lessee-pays for vehicle depreciation during lease • Interest rate - generally lower than when buying • At End of Lease • No asset value in vehicle because you have only been renting • Written into contract: • End-of-lease costs cover reduced value of vehicle, excess mileage, penalties for ending lease early, significant wear & tear • Option to purchase at end of lease for the residual value or to extend lease video link: leasing basics video link- leasing benefits

23. Step 3. Do the research Leasing Vs. Purchasing • Installment loans-regularmonthly payments of approximately same $ • Secured at banks, credit unions, finance companies, savings & loans • Variables affecting loan: • Length of time to repay (T)Time • Annual percentage rate (R)Rate • Amount of $ borrowed(P) Principle • Lender holds title until paid in full • Purchasing---buyer pays cash or takes out a loan and pays for the vehicle with monthly payments---costs more than paying cash because includes interest on amount borrowed • Paying cash from savings • Dealer financing---easy, on-the-spot source • Get separate quotes for car and for financing • Check financing terms at other sources • Check online for rates and terms • Dealer holds title until paid (collateral) • Either option may include trading in another vehicle for part of price

24. Question? Brad needs to find an installment loan where his monthly payments will be as low as possible. One condition of this is having: A. a longer term to repay the loan. B. to obtain financing from a bank. C. to lease, rather than buy, a vehicle. D. to obtain financing from the a dealership.

25. Step 4.Obtain automobile insurance Did You Know? • There are 35 million automobile accidents annually! • Insurance Information Institute http://www.iii.org/ • Motor vehicle crashes are the leading cause of death in the United States! • Consumer Education & Economics

26. What is Risk? • Risk – • Uncertainty about a situation’s outcome • Unpredictable events which can lead to loss or damage

27. What is automobile Insurance? • Automobile Insurance • Protects individuals against risk from automobile accidents • Legal contract between an individual (consumer) and an insurer (insurance company)

28. Purpose of Automobile Insurance • To help individuals limit financial loss when an automobile accident occurs • When people buy automobile insurance, they transfer part of the financial risk to the insurance company

29. What About Your Insurance? • This video clip from YouTube discusses the following: • How teen drivers can stay safe on the road • What effect teen drives have on insurance policies • What teenagers can do to help keep insurance costs low • http://www.youtube.com/watch?v=0rjz8Rp9sLo

30. What is a Policy? • Policy - Contract between the individual and insurer specifying terms of the insurance including: • Premium – fee paid to the insurance company to be covered under the specified terms • Deductible – amount paid by the policy holder (consumer) for the initial portion of a loss before the insurance coverage begins

31. Premiums vary according to: • Amount of coverage – the more you buy, the higher the premium • Driver classification – age, sex, marital status of driver • Driving record and habits---high-risk drivers find it harder to buy insurance • Marriage status – Is your spouse on your insurance • State of residence • Number of cars insured – More cars the higher the premium • Cost of vehicle---higher rates for luxury and sports cars • Whether young driver has completed a driver’s education course • Amount of deductible---amount insured pays before insurance company pays on claim - $0, $500, or $1000

32. Types of auto insurance available Liability Insurance is Required by NC law • Liability insurance covers drivers responsibility----when liable for an accident where others are injured or killed • Bodily injury liability covers others when others are injured or killed. DOES NOT cover the insured person (driver) • Property damage liability covers when property of others is damaged. Does NOT cover the insured person’s property. Ex…animals, telephone poles, bridges, etc… • Collision-pays for loss or damages to insured person’s car due to accident. Charges points to insurance if claim filed: Points make premiums increase: Does NOT cover injuries to people • Comprehensive physical damage- pays for losses due to fire, theft, vandalism, falling objects, hail, windstorm, flood, impact with wild animal • Medical payments- pays insured’s medical expenses resulting from accident • Uninsured/Underinsured motorist- Protects against driver who causes accident, but does not carry insurance or has low limits of insurance coverage • Rental reimbursement- costs of renting a car while yours is being repaired • No-fault auto insurance pays claims regardless of who is at fault • NOT AVAILABLE IN NORTH CAROLINA

33. Question? When Blake’s car slid on ice off the road into a tree, his insurance paid for the injuries to his passenger. Which type of insurance is this? A. Collision B. Comprehensive physical damage C. Liability D. Medical

34. Insurance Rate Influences • Insurance rates are determined for each individual: • Age • People under age 25 pay higher premiums • Gender • Men have more accidents, rates may be higher • Marital status • Married drivers have fewer accidents, so rates are lower

35. Influences continued • Driving record • Safe drivers have lower rates • Number and type of tickets will increase rates • Number and severity of accidents will increase rates • Type and age of vehicle • Newer, more expensive, and higher repair cost vehicles have higher rates • Frequently stolen vehicles have higher rates • Color of vehicle does not matter

36. Influences continued • Vehicle use • Rates are usually higher when driving more than 7,500 miles a year • The more one drives, the greater the chance of an accident • Place of Residence • Rates vary among states • People in large cities usually pay more than in rural or suburban areas • Weather conditions may affect rates

37. Influences continued • Number of drivers on the policy • Additional drivers raise the premium • It costs a driver under the age of 25 less to be added to his/her parents’ policy than to purchase a separate policy • Driver training • May receive a discount for having taken a driver’s education course

38. Influences continued • Good student discount • May receive a discount for good grades in school • Multiple car discount • May receive a discount for having two or more vehicles on the same policy • Anti-theft systems • May receive a discount for anti-theft devices such as car alarms

39. Influences continued • Multiple policies with the same company • Having both automobile and home insurance • Long-time customers • Some companies might offer discounts to long-time customers

40. Save Money on automobile Insurance • Shop around • Select appropriate coverage and limits • Avoid expensive or high-performance vehicles • Take advantage of discounts

41. video link: auto insurance basics video link: tips on buying auto insurance

42. What if you buy a defective vehicle? • www.autopedia.com/#lemonlaw • http://www.ncdoj.com/Consumer/Automobiles.aspx • Class Activity

43. Good Luck!

44. Auto Claims • In a two car accident…The “at fault driver”of a vehicle that damages other property or injures other people is liable for the cost of repairs. • In a one car accident…you are at fault! • Hitting a bridge, tree, ditch, etc. • North Carolina financial responsibility laws mandate that drivers carry bodily injury and property liability insurance coverage.

45. Auto Coverage-Collision • Although not required by financial responsibility law, collision is • Usually required by a lienholder if loan on vehicle is not paid in full • A lienholder is a bank, individual or loan company who holds a secured interest in the property until the loan is paid in full. • Example: If car catches fire and loan is still outstanding, the claim dollars are paid to insured and lienholder.

46. Comprehensive Auto Insurance Usually required by creditor if there is a loan • Protects the insured vehicle against damage from almost all damages except collision • Fire • Theft • Vandalism • Hail • Windstorm • Windshield damages • Collision with wild animal including fowls • Does NOT charge points when claim is filed

47. Uninsured/Underinsured Motorist Coverage • Protects policyholder against drivers • Without insurance insurance to cover the loss suffered • Without enough insurance to cover the loss suffered • Examples: • Hit and run drivers • Drivers who let insurance policy lapse • Drivers involved in serious accidents who carry low $ liability limits of coverage

48. Optional Auto Coverage… • Medical payments - Covers anyone in vehicle or hurt by vehicle, even if not moving • Ex: Broken finger by closing finger in door or trunk, pedestrians • Towing Expense - Pays tow fees • Rental Reimbursement - Covers cost of rental when vehicle being repaired due to accident