Credit Union Financial Education Game Car Quest

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1 Texts
2 Lessons
3 Videos
4 Questions
5 Related Work

Texts

Alternatives to buying a used or new car
- Walking
- Sharing a car with a sibling or friend
- Parent’s car
- Go with a friend
- Bike
- Public transportation
- Taxi
How to get a car
- Parents or a friend gives you car
- Lease
- The best time to buy is at the end of the month
- Auto dealerships sell new and used cars and offer loans
- Warranties are important
- Used Cars
  - Talk to the previous owner if possible
  - Have inspection by unbiased mechanic
- Used cars may be bought from a number of sources
  - Craig’s list
  - eBay
  - newspaper adds
  - FOR SALE BY OWNER signs
  - word of mouth
  - friends
  - independent used car dealers
  - Auto Auctions (must engage licensed dealer)
  - Charities (donated cars)
  - Online used car markets: www.kbb.com, www.Autodirect.com, www.carfax.com

How much does it cost-to buy a car?
- Cars are expensive but can be affordable
  - There may be rebates for recent college graduates
  - Customer Loyalty discounts
- Budget-based decision - Adjust budget to include ALL costs
What type of car
- New/used
- Size
- Fuel type
- Style
- SUV/Truck/Motorcycle
- Hybrid

Where to get the money
- Gift from parents or friend
- Your savings
- Borrow it from a bank
- Borrow it through the dealer
- Credit Union probably has best rates and terms
- Many people have car loans
  - Loan providers (dealer, depository institution)
  - One may borrow most or all of the price for the car
  - Payments -3-5 years
  - Pay monthly- equal payments
  - Interest is the charge you pay extra for borrowing money
  - Interest charged on loan (interest is lower on new car)
  - With interest you have to pay more than what the car is worth
  - Shop online for interest rates
  - Different interest for different people- some more than others
    -  Credit Score
    -  Comparison shopping for auto loan rates
    -  www.bankrate.com
How much does it cost- other expenses
- Gas
  - Smaller cars use less gas
  - Gas prices go up and down
  - Use less on highway than when you’re in the city
  - Driving habits affect gas mileage
  - Air conditioner use may affect mileage
- Insurance
  - Everyone must have liability insurance
  - Other types are optional
  - Shop online for insurance quotes
  - Different rates: Gender, Good grades, Deductible, Value of car, Location garaged, Traffic violations- accidents/tickets, Credit score
- Repair
  - Any damages
  - Engine problems
- Parking meters
- Tickets
- Maintenance
  - Oil changes
  - Tires
  - Car washes
- Accessories
  - Stereo
  - GPS

Lessons

New or Used, Cars are expensive to purchase and operate.

Most people do not purchase homes or cars with money they have saved or were given.

Most cars are purchased with a combination of the customer's savings (the "down" payment) and a loan that is arranged by the new or used car dealer or from a depository institution (bank, credit union, etc). In most cases, the "down" payment is much less than the amount of money borrowed to buy the car. An example: $2,000 "down” a loan of $18,000 to purchase a car costing $20,000.

The car dealer will try to arrange the loan for the customer because the loan is a source of profit. Sometimes dealers offer a very low interest rate that seems "too good to be true". Sometimes dealers offer a loan with "no money down", meaning that the customer can borrow the entire cost of the car.

The interest rate charged on the car loan varies according to several factors. It is worthwhile to shop around for rates and other terms.

In addition to the car dealer, car loans can be obtained from banks, credit unions, and sometimes from insurance companies. The rates for a car loan (or a home loan, credit card, student loan or any other type of loan) are invariably higher than the interest rate that one would receive on a savings account, CD or interest bearing checking account. Sometimes a LOT higher.

Regardless of how you pay for your car, you are required by state law to obtain "liability" insurance. If you borrow money to buy the car, you must also obtain "comprehensive" and "collision" insurance, which are expensive.

If your interest rate is lower, your monthly payment is lower (Assuming everything else is the same). If your credit rating score is higher, your monthly payment is lower (Assuming everything else is the same). If your repayment period is longer (number of years - typically 3, 4, 5) , your monthly payment is lower (Assuming everything else is the same). If an adult co signs (promises to guarantees) your loan, you might be able to get a loan if your income is otherwise not high enough.

Videos

The final version of the video about how to buy a car: http://www.youtube.com/watch?v=UO2WNF2sRLw A prototype Quest tutorial about the basics of a car loan: http://www.youtube.com/watch?v=M6Ck0H1HF4U

Questions

1. A cosigner is A. Someone who helps you find what car to purchase. B. A person who signs his or her name to a loan agreement, if the primary debtor does not pay, the cosigner is fully responsible for the loan. C. A company that assist you in your payments D. None of the above

2. Who typically offers the lowest APR rate when financing your car? A. The car dealer B. A commercial bank C. A credit union D. They always offer the same

3. All else equal what financing term would have the lowest monthly payments? A. 3 years B. 4 years C. 5 years D. They are all the same

4. How does a down payment when purchasing a car affect your monthly payments all else equal? A. It decreases the monthly payments B. It increases the monthly payments C. It does not change the monthly payments D. It is different for each bank

5. If you can afford a total of $500 a month for transportation what does that entail? A. Car payment B. Gas and Insurance C. Maintenance and repair D. All of the above

6. What are some reason(s) people finance their car? A. They do not have enough saved up B. They are saving their money for possible emergencies C. They can only afford to pay monthly payments D. All of the above

7. If you were financing a $20,000 car, for 5 years at 5.9% APR, how much would your monthly payments be? A. $285 B. $385 C. $485 D. $585