Podcast
Questions and Answers
What is one of the first steps to consider when buying or leasing a new or used vehicle?
What is one of the first steps to consider when buying or leasing a new or used vehicle?
- Immediately applying for an auto loan
- Figuring out how much you should be able to afford and spend on the car (correct)
- Choosing the most expensive car available
- Ignoring the costs and focusing only on the desire for a new vehicle
What does 'afford' mean in the context of the text?
What does 'afford' mean in the context of the text?
- Taking on excessive debt to buy a vehicle
- Being able to live within your means and maintain your budget (correct)
- Spending as much as possible on a car
- Purchasing the most luxurious vehicle available
What are some ancillary costs associated with vehicle ownership mentioned in the text?
What are some ancillary costs associated with vehicle ownership mentioned in the text?
- Insurance, gasoline, basic maintenance, and replacement of worn items (correct)
- Leasing fees and interest rates
- Luxury upgrades and accessories
- Only the initial purchase cost
How are interest rates expected to impact the cost of auto loans and leasing?
How are interest rates expected to impact the cost of auto loans and leasing?
If the cost of replacing the brakes is $600, how much would you have spent on the set of tires?
If the cost of replacing the brakes is $600, how much would you have spent on the set of tires?
If the cost of leasing a vehicle for 3 years is $6,900, what would be the cost of leasing it for 4 years?
If the cost of leasing a vehicle for 3 years is $6,900, what would be the cost of leasing it for 4 years?
If the vehicle's MSRP was $25,000 at the beginning of the lease, what would be the new MSRP after a 6% increase?
If the vehicle's MSRP was $25,000 at the beginning of the lease, what would be the new MSRP after a 6% increase?
What is the average transaction price for a new car in January 2019?
What is the average transaction price for a new car in January 2019?
How long have car loan lengths grown to on average?
How long have car loan lengths grown to on average?
What can new vehicles lose in the first year of ownership?
What can new vehicles lose in the first year of ownership?
What is the purpose of a tire Road Hazard warranty?
What is the purpose of a tire Road Hazard warranty?
What is the Lemon Law designed to protect consumers from?
What is the Lemon Law designed to protect consumers from?
What is the advisable focus when making a vehicle purchase?
What is the advisable focus when making a vehicle purchase?
What should consumers research before purchasing a vehicle?
What should consumers research before purchasing a vehicle?
What is the purpose of over-servicing vehicles?
What is the purpose of over-servicing vehicles?
What do vehicle maintenance costs include?
What do vehicle maintenance costs include?
What sources can provide helpful information for informed vehicle selection?
What sources can provide helpful information for informed vehicle selection?
What should be considered a necessity for many in areas with limited public transit?
What should be considered a necessity for many in areas with limited public transit?
What is the average price for used cars in late 2018?
What is the average price for used cars in late 2018?
What is the average annual depreciation rate of vehicles according to the text?
What is the average annual depreciation rate of vehicles according to the text?
Why does the text advise against buying a luxury vehicle if it exceeds one's budget?
Why does the text advise against buying a luxury vehicle if it exceeds one's budget?
What is a potential consequence of spending on unnecessary vehicle accessories, according to the text?
What is a potential consequence of spending on unnecessary vehicle accessories, according to the text?
Why is it important to research the costs of tires, maintenance, and repairs before purchasing a vehicle?
Why is it important to research the costs of tires, maintenance, and repairs before purchasing a vehicle?
What can happen if one lacks knowledge about a vehicle's true value, according to the text?
What can happen if one lacks knowledge about a vehicle's true value, according to the text?
Why are run-flat tires and low-profile tires mentioned in the text?
Why are run-flat tires and low-profile tires mentioned in the text?
What is the potential consequence of buying a luxury vehicle that exceeds one's budget?
What is the potential consequence of buying a luxury vehicle that exceeds one's budget?
Why is it important to plan for vehicle purchases and not overspend, according to the text?
Why is it important to plan for vehicle purchases and not overspend, according to the text?
What is the potential consequence of not researching maintenance expenses before purchasing a luxury vehicle?
What is the potential consequence of not researching maintenance expenses before purchasing a luxury vehicle?
What is the purpose of emergency roadside assistance costs mentioned in the text?
What is the purpose of emergency roadside assistance costs mentioned in the text?
Why does the text advise against overspending on unnecessary vehicle accessories?
Why does the text advise against overspending on unnecessary vehicle accessories?
What is the potential consequence of being 'upside down' on an auto loan?
What is the potential consequence of being 'upside down' on an auto loan?
What can help in making decisions about necessary expensive repairs for a vehicle?
What can help in making decisions about necessary expensive repairs for a vehicle?
What is a potential advantage of maintaining an excellent credit score when considering a new car purchase?
What is a potential advantage of maintaining an excellent credit score when considering a new car purchase?
What is a common trend in the depreciation of new cars?
What is a common trend in the depreciation of new cars?
What is a potential advantage of leasing a vehicle with good to excellent credit?
What is a potential advantage of leasing a vehicle with good to excellent credit?
What would be the monthly payment for a purchased vehicle with a $25,000 MSRP and a $3,000 down payment, financed at 3.5% interest for 5 years?
What would be the monthly payment for a purchased vehicle with a $25,000 MSRP and a $3,000 down payment, financed at 3.5% interest for 5 years?
What is the total cost to own a purchased vehicle over six years, including trade-in value?
What is the total cost to own a purchased vehicle over six years, including trade-in value?
What is the total cost of leasing the same vehicle with a $2,500 down payment for 36 months at about $200 per month?
What is the total cost of leasing the same vehicle with a $2,500 down payment for 36 months at about $200 per month?
What is the cost comparison between owning the purchased vehicle over six years and the cost of two leases over six years?
What is the cost comparison between owning the purchased vehicle over six years and the cost of two leases over six years?
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Study Notes
Vehicle Ownership and Financial Considerations
- Underwater auto loans can take many years to recover from, leading to additional fees and unnecessary interest paid on the gap between the loan and the vehicle's value.
- Setting a time frame for how long to keep a vehicle in mileage or years and knowing its trade-in value can help in making decisions about necessary expensive repairs.
- Endless expensive repairs on an older or high-mileage vehicle can lead to spending more on repairs than the vehicle is worth, making it a money pit.
- Implementing expense reduction and savings growth strategies can help in maintaining an excellent credit score, possibly qualifying for 0% APR financing for a new car.
- New cars can lose more than 10% of their value in the first month and can drop by over 20% after the first 12 months, with roughly 10% annual depreciation for the next four years.
- Specific factors can affect vehicle depreciation, so it's important to focus on purchasing vehicles that meet current needs for the next 3-5 years and are within budget.
- Leasing a vehicle with good to excellent credit can be a budget-friendly option, especially if the terms of the lease align with the intended use of the vehicle.
- Leasing a vehicle can result in significantly lower monthly payments compared to purchasing, especially if the only way to afford a new vehicle is through leasing.
- A purchased vehicle with a $25,000 MSRP and a $3,000 down payment, financed at 3.5% interest for 5 years, would result in a monthly payment of about $400 for 60 months.
- The total cost to own a purchased vehicle over six years, including trade-in value, would be $20,000, not including out-of-warranty repairs and normal wear and tear parts.
- Leasing the same vehicle with a $2,500 down payment for 36 months at about $200 per month would result in a total cost of $9,700 over the three-year lease.
- Owning the purchased vehicle over six years costs $20,000, while the cost of two leases over six years totals $20,700, not including out-of-warranty repairs and normal wear and tear parts.
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