OBJECTIVE 6.00UNDERSTAND SHOPPING OPTIONS AND PRACTICES FOR MEETING CONSUMER NEEDS.

6.02 STUDENTS WILL UNDERSTAND OPTIONS AND PRACTICES FOR MEETING TRANSPORTATION NEEDS.

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

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

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?

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

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

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.

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

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

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

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

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.

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

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

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

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

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

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

HOW TO COMPARE MPG

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

http://www.fueleconomy.gov/feg/printguides.shtml

Actual mileage will vary with options, driving conditions, driving habits, and vehicle condition

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

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

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

Leasing: monthly payments in exchange for exclusive use of vehicle for a specified period of time; like renting

STEP 3. DO THE RESEARCHLEASING VS. PURCHASING

video link- leasing benefits

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

Installment loans-regular monthly 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

STEP 3. DO THE RESEARCHLEASING VS. PURCHASING

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.

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

Step 4.Obtain automobile insurance

WHAT IS RISK?

Risk –

Uncertainty about a situation’s outcome

Unpredictable events which can lead to loss or damage

WHAT IS AUTOMOBILE INSURANCE?

Automobile Insurance

Protects individuals against risk from automobile accidents

Legal contract between an individual (consumer) and an insurer (insurance company)

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

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

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

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

TYPES OF AUTO INSURANCE AVAILABLE

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

Liability Insurance is Required by NC law

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

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

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

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

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

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

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

SAVE MONEY ON AUTOMOBILE INSURANCE

Shop around

Select appropriate coverage and limits

Avoid expensive or high-performance vehicles

Take advantage of discounts

video link: auto insurance basics

video link: tips on buying auto insurance

WHAT IF YOU BUY A DEFECTIVE VEHICLE?

www.autopedia.com/#lemonlaw

http://www.ncdoj.com/Consumer/Automobiles.aspx

Class Activity

GOOD LUCK!

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.

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.

COMPREHENSIVE AUTO INSURANCE

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

Usually required by creditor if there is a loan

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

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