Cars and Insurance - Getting a Set of Wheels

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1 Name Period All Classes Cars and Insurance - Getting a Set of Wheels Overview Few of us live, work, and shop within a small geographic area. Most of us need transportation to go to work or school or for other reasons. Transportation, and more specifically the automobile, has become a necessity for most of the people in our society. Your selection and use of an automobile is a fundamental part of your personal financial plan. Whether you buy a new car or a used car, there are proven strategies that will make the experience better and minimize your costs. In this unit, you will investigate the steps in buying a car and in financing the purchase. You will determine the costs associated with owning and operating a vehicle including maintenance, insurance and fees. In this unit, you will... describe the process of buying a new or used car, including selection, financing, and wise buying practices explain automobile leasing costs, processes, advantages, and disadvantages list the costs of owning and operating a car explain the different types of automobile insurance and strategies for reducing costs explain the different types of health, life and disability insurance Vocabulary Base Price Beneficiary Blue Cross/Blue Shield Car Make Car Model Cash Value Collision Insurance Comprehensive Insurance Copay Deductible Depreciation Disability Insurance Down Payment Gap Insurance HMO Insurance Invoice Price Leasing Liability Insurance Medical Payments Insurance Medicare Miles per Gallon (MPG) Monroney Sticker Price (MSRP) POS Insurance PPO Insurance Premium Residual Value Social Security Insurance Term Life Insurance Uninsured Motorist Coverage Vehicle Identification Number (VIN) Whole Life Insurance Worker's Compensation Insurance Accelerated Page 1

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3 Buying a New or Used Car Skill-Building Activity Vehicle Comparison Shopping Section1 Directions: Identify your personal transportation wants and needs by answering the following questions: How will you use your car? Choose all that apply. rts and Recreation What kinds of roads will you drive on? This will help you decide whether you need a front-wheel, rearwheel, or four-wheel drive vehicle. -road & Snow conditions Where will you park your car most of the time? Your parking space will determine the amount of money you will want to spend if the car isn t protected from the weather or theft. What extra features would you like in a car? /Moon roof Navigation System Automatic transmission Deluxe Safety Features Four-wheel drive Deluxe Audio System Leather Seats Video System Third-Row Seat Roof Rack Heated Seats Cruise Control How will you carry insurance? Identifying your insurance requirements will help you gain an accurate quote from an insurance company. policy Do you qualify for any insurance discounts? Knowing what discounts you qualify for will help you to get an accurate quote from an insurance company. education -drinking and nonsmoking No past accidents or tickets Do you plan to purchase a new or a pre-owned car? New car (average cost is $25,000) Pre-Owned car (average cost is $15,000) What is the maximum age of the car you will accept? What is the maximum number of miles you will accept? How will you pay for your vehicle? You need to know how you will pay for your car to prepare for financing a loan, if required. How much money can you contribute? How much money will your parents contribute? What is the maximum loan you can afford? Total Available for car purchase Accelerated Page 3

4 Buying a New or Used Car Skill-Building Activity Vehicle Comparison Shopping Section 2 Directions: Identify three types of vehicles that meet your criteria and complete the questions below. Research to compare pricing and features for your three choices. Vehicle 1: Year: Make: Model: Price: Highway MPG: City MPG: Miles: Annual Fuel Cost: Monthly Fuel Cost: Safety Rating: Features: /Moon roof Navigation System Automatic transmission Four-wheel drive Deluxe Audio System Leather Seats Roof Rack Heated Seats Cruise Control Third-Row Seat Vehicle 2: Year: Make: Model: Price: Highway MPG: City MPG: Miles: Annual Fuel Cost: Monthly Fuel Cost: Safety Rating: Features: /Moon roof Navigation System Automatic transmission Four-wheel drive Deluxe Audio System Leather Seats Roof Rack Heated Seats Cruise Control Third-Row Seat Vehicle 3: Year: Make: Model: Price: Highway MPG: City MPG: Miles: Annual Fuel Cost: Monthly Fuel Cost: Safety Rating: Features: /Moon roof Navigation System Automatic transmission e Safety Features Four-wheel drive Deluxe Audio System Leather Seats Third-Row Seat Roof Rack Heated Seats Cruise Control Which vehicle would you choose and why? Accelerated Page 4

5 Buying a New or Used Car Skill-Building Activity Financing a Car Loan Down Payment: The amount of your own money you pay upfront for the vehicle. It is recommended that you make a 10% to 20% down payment. The larger the down payment you are able to make, the less principle you will need to borrow. SECTION 1 Directions: Calculate the amount of down payment required to purchase a $13,000 car. 10% down payment 20% down payment SECTION 2 Directions: Use the Monthly Loan Payment Calculator on the class webpage to find the values. 1. Cost of Vehicle (Purchase Price) $9,000 Loan Term 36 months Interest Rate 9% Down Payment 10% Monthly Payment: Cost of the Loan (Total Interest): Total Loan Amount: 2. Cost of Vehicle (Purchase Price) $9,000 Loan Term 48 months Interest Rate 9% Down Payment 10% Monthly Payment: Cost of the Loan (Total Interest): Total Loan Amount: 3. Cost of Vehicle (Purchase Price) $9,000 Loan Term 36 months Interest Rate 9% Down Payment 20% Monthly Payment: Cost of the Loan (Total Interest): Total Loan Amount: 4. When the loan term increased the monthly payment: increased decreased When the loan term increased the cost of the loan: increased decreased When the down payment increased the monthly payment: increased decreased When the down payment increased the cost of the loan: increased decreased Section 3 Directions: Complete the loan information for the car or your choice. Car Manufacturer, Make and Model: Purchase Price: Down Payment: Total Loan Amount: Interest Rate: % Loan Term: Monthly Payment: Cost of the Loan: Accelerated Page 5

6 Buying a New or Used Car Foundation Activity Leasing v. Buying Directions: Access the Leasing v. Buying link on the class webpage. Use the information on the site to complete the worksheet. You may summarize the information in your own words if you wish. Item Leasing Buying Ownership You do not own the car. You own the car. Up-Front Costs Monthly Payments Monthly payments are less. Monthly payments are more. Early Termination Vehicle Return Future Value Return the car, pay any end-of-lease costs and walk away. The dealership assumes the loss in value (depreciation) You have to sell or trade the vehicle when you want to purchase a new one. You assume the loss in value (depreciation) Mileage Excessive Wear End of Term Usage Costs At the end of the lease (usually 2-4 years) you will have a new payment to purchase the car or lease a new car. At the end of the loan (usually 4-6 years), you have no further loan payments. You are responsible for monthly loan/lease payment, insurance costs, traffic tickets, ongoing maintenance costs, gasoline, state registration, emissions and inspection costs. 1. What are your rights as a lessee? 2. What are your responsibilities as a lessee? Accelerated Page 6

7 Buying a New or Used Car Foundation Activity Leasing v. Buying Accelerated Page 7

8 Other Types of Insurance Foundation Activity Insurance Basics Directions: Access the Met Life link on the class webpage to answer the questions. 1. Name at least seven (7) things you should do if you are in an accident? 2. Define liability insurance. What are the two different types of liability insurance? 3. Explain what the number 50,000/100,000/30,000 represents. 4. What is the difference between Comprehensive and Collision coverage? 5. What is a deductible? 6. What kinds of bills or costs will Medical Payments/PIP coverage provide? Accelerated Page 8

9 Other Types of Insurance Foundation Activity Insurance Basics 7. What is uninsured/underinsured motorist protection, and why do some states require it? 8. What are the seven (7) factors that determine or affect your auto insurance premium? 9. Name four (4) ways teens can save money on car insurance? 10. What are the six (6) basic elements available in a typical automobile insurance policy? Directions: Access the Department of Motor Vehicles link on the class webpage to answer the questions. 11. What is the minimum amount of insurance required to legally drive a car in Pennsylvania? 12. What are the consequences to driving without the proper amount of Pennsylvania car insurance? Accelerated Page 9

10 Other Types of Insurance Foundation Activity Insurance Basics Directions: Write the appropriate term on each line. Words may be used once. Dental Disability Insurance Fidelity Bond Health insurance HMO/EPO Homeowners Life Insurance Medicare/Medicaid POS PPO Private pay Property Insurance Renters Social Security Term Life Vision Whole Life Worker s Compensation - protects against risk of an early death The beneficiary is the person who receives the cash from the policy permanent insurance temporary insurance for a set period of time - protects against risk of medical bills (routine and emergency care) A deductible is an amount you must pay before any insurance money is used for bill Coinsurance is when you pay part of a bill (i.e. 30%) and the insurer to pays the rest government medical insurance contracts with only certain providers, referrals needed; no outside coverage contracts with only certain providers; referrals needed; some outside coverage contracts with only certain providers; NO referrals; some outside coverage - protects against risk of not being able to work due to illness or injury provides payments to workers who are injured on the job government insurance for people who are unable to work insurance paid by you or your employer - protects your personal assets when they are stolen or damaged covers possessions and damage to the house covers only possessions Other Types of Insurance employee dishonesty insurance insurance for eye care and corrective lenses insurance for routine and restorative dental care Accelerated Page 10

11 Cars Skill Building Activity Monthly Operating Costs Section 1: Insurance Rates Directions Use the Car Insurance Rates link on the class webpage and find the following information. National Car Insurance Premiums Data for the Past 12 Months (Use the CarInsurance.com Premium Index - National Average Past Year graph) 1. In what month was the highest national average of car insurance premiums? 2. In what month was the lowest national average of car insurance premiums? 3. What was the national average of car insurance premiums for the most recent month? 4. Have insurance rates been rising, falling or staying the same over the last 12 months? Pennsylvania Insurance Rates (Use the State Average Premium Charts and Trends table) 5. a. During what month was the cost for PA car insurance rates the highest? b. How much was the average cost in dollars for that month? 6. What was the most recent month s average cost for premiums in PA? 7. Click on the link for Pennsylvania in the table. What is the average insurance cost in Newtown, PA (zip 18940)? What is the average insurance cost in Philadelphia, PA (zip 19133)? What is the average insurance cost in Bellefonte, PA (zip 16823)? What factors might account for the difference in premiums in these areas? Next Page Accelerated Page 11

12 Cars Skill Building Activity Monthly Operating Costs Section 2 Annual Costs Directions: The average person drives their car 15,000 miles per year. Use this form to estimate how much it will cost you to keep your vehicle on the road. EXPENSE ANNUAL COST Oil Change and lubrication ($30 every 3,000 miles) $ Tire Rotation ($70 every 5,000 miles) $ Tune-Up ($50 every 30,000 miles) $ PA Car Registration ($36 once a year) $ PA Inspection and Emissions Test ($70 once a year) $ Auto Insurance Cost (Section 1 Question 5b) $ Total Annual Costs $ Section 3 Monthly Costs Directions: Use this form to estimate how much it will cost you per month to keep your vehicle on the road. The total monthly cost is what you should use for your budget planning. EXPENSE MONTHLY COST Maintenance & State Fees (Section 2 Total Annual Cost 12) $ Monthly gas (From Vehicle Comparison Shopping worksheet) $ Monthly car payment (From the Financing a Car Loan Worksheet) $ Total Monthly Costs $ Accelerated Page 12

13 Review Cars and Insurance Across 1. main advantage to used cars 4. what you should take before buying a car (2 wrds) 8. insurance protects you from this 9. amount you have to pay before your insurance company will begin making payments 10. type of life insurance that provides temporary benefits 12. insurance that covers injury to others 13. type of insurance that covers a tree falling on your car 14. health insurance plan that contracts with only certain providers and requires referrals 15. price buyers receive for their old car 16. suggested retail price of a car (abb) 17. amount of cash you pay for a car (2 wrds) 18. renting a car 21. loss of value in a car 22. insurance that covers injuries by a hit-and-run driver (2 wrds) 26. place where you can get a car loan (2 wrds) 28. the first thing you should consider when making a purchase 29. these can increase your premiums Accelerated Page 13

14 Down 1. insurance that covers damage from a crash 2. another name for the MSRP (2 wrds) 3. cost of a car without options 5. insurance that pays money if you cannot work 6. name given to insurance payments 7. pays employees injured on the job (2 wrds) 11. value of a car in the Kelley Blue Book 18. insurance that protects against the risk of an early death 19. cars with large engines use lots of this 20. one in people are uninsured 23. student premiums can be affected by theses 24. initial price the dealer pays for a car 25. type of life insurance that builds cash value Accelerated Page 14

15 Review Cars and Insurance 1. When negotiating the purchase price of a new car, should you base your estimated cost on the base, price, ticker price, invoice or MSRP? 2. Place a check mark on the line if the item can affect your car insurance premium. a. age b. gender c. where you live d. how much money you make e. your credit rating f. the amount of your car loan g. type of gas you use h. your grades i. your deductible j. your down payment k. make and model of your car l. where you work 3. Which type of insurance is required of all drivers in PA? 4. Which type of insurance is usually required if you have a car loan? 5. How often should you have the following maintenance items done on your car? a. Oil change b. Inspection c. Tire Rotation d. Tune Up 6. What annual fee will you pay to the state of PA for your car? 7. What is the biggest advantage to leasing a car? 8. List three costs you might be responsible for paying if you lease a car instead of buying a car? 9. You would like to purchase a $25,000 car. You have 10% available for a down payment, and you would like to take a loan for 36 months. Calculate each dollar value using 4% interest for the loan. (Use the Monthly Loan Payment Calculator link on class webpage.) a. Amount of the down payment b. Amount of PA sales tax c. Total amount of the loan d. Monthly loan payment e. Total cost of the loan f. Total amount of interest paid 10. What will decrease your loan payment? lower interest rate shorter loan term lower down payment 11. If you cannot afford insurance, what are some other ways you can avoid risk? 12. Which type of health insurance usually has a lower cost? 13. Which type of health insurance usually has the most flexibility? Accelerated Page 15