PURCHASING A
VEHICLE
Chapter 16
Car Buying Terms
■ Invoice Price – the manufacturer’s initial charge (including delivery) to the dealer; usually
higher than the dealer’s final cost because dealers receive rebates, allowances, discounts,
and incentive awards.
■ Base Price – the cost of the vehicle with standard equipment and warranty but without
optional equipment; price is printed on the Monroney sticker
■ Monroney Sticker Price (MSRP) – the information printed on the Monroney sticker, shows base
price, manufacturer’s transportation charge, and fuel economy of the vehicle; sticker is
required by federal law to be affixed to a new vehicle’s window; only the purchaser may
remove it
■ Dealer Sticker Price – the Monroney sticker price plus the suggested retail price of dealerinstalled options, such as additional dealer markup (ADM) or additional dealer profit (ADP),
dealer preparation, and undercoating; price is usually on a supplemental sticker.
Leasing or Buying A New Vehicle
LEASING
BUYING
Ownership
Must return the vehicle at the end of the lease
unless you choose to buy it
you own the vehicle and get to keep it at the
end of the financing term
Up-front
costs
May include the first month’s payment, a
refundable security deposit, a capitalized cost
reduction (like a down payment), taxes,
registration fees, and other charges
Include cash price or a down payment,
taxes, registration fees, and other charges
Monthly
payments
Usually lower than monthly loan payments
because you are paying for the vehicle’s
depreciation during the lease term, plus rent
charges (like interest), taxes, and fees
Usually higher then monthly lease
payments because you are paying for the
entire purchase price of the vehicle, plus
interest and other finance charges, taxes,
and fees
Early
termination
Responsible for charges if you end the lease early
Responsible for any pay-off amount if you
end the loan early
Vehicle
return
May return the vehicle at lease end, pay any endof-lease costs, and walk away
May have to sell or trade the vehicle when
you decide you want a different one
Leasing or Buying A New Vehicle
Leasing
Buying
Future value
The lessor has the risk of the future market
value of the vehicle
You have the risk of the vehicle’s future
market value
Mileage
Most leases limit the number of miles you
You may drive as many miles as you want,
may drive; will likely have to pay charges if you but higher mileage will lower the vehicle’s
exceed limits
trade-in or resale value
Excess wear
Most leases limit wear to the vehicle; likely
have to pay extra charges if you exceed limits
No limits or charges but excessive wear will
lower the vehicle’s value
End of term
At the end of the lease, (typically 2-4 years)
you may have a new payment to finance the
purchase of the existing vehicle or to lease
another vehicle
At the end of the loan term (typically 4-6
years), you have no further loan payments
The same vehicle can have different
prices. How is that possible?
Buyer’s Guide
■ Look over the Buyer’s Guide on p. 345.
■ This form must appear in the window of used vehicles sold by dealers.
■ Does it become part of the sales contract with the dealer? Explain
Look over the label from a new car on
page 349.
■ A label like this must appear on a new car when it is sold.
■ What federal legislation requires such a label?
Types of Automobile Insurance
Type of Insurance
What it Covers
Bodily Injury Liability
Injuries to other persons if the insured is at fault
Property Damage Liability Damage to the car(s) or property of others if the insured is at fault
Collision
Damage to the insured’s car
Comprehensive
Loss or damage to the insured’s car caused by fire, flood, storm,
theft, or vandalism
Medical Payments
Medical expenses incurred by anyone occupying the insured’s car
Uninsured or
Underinsured Motorist
Injuries to the insured if another is at fault and has little or no
insurance or the insured is involved in a hit-and-run accident
Automobile Insurance Coverage
look over the chart on p. 351.
■ Buying bodily injury and property damage coverage can reduce the financial impact
of an accident.
■ What type of expenses would be paid for by bodily injury liability coverage?
■ What does the federal odometer law require?
■ What does APR mean?
■ What do lemon laws protect?
■ What is comprehensive insurance?
■ What is collision insurance?
■ What is the duty to notify?
■ If you damage your neighbor’s fence while attempting to parallel park, which type of
insurance will cover this event?
Think about it….
■ Is carrying a higher deductible and paying a lower premium a good idea?
– Why or why not?
■ What if one of your friends asked to borrow your car for the weekend.
– Explain what your decision would be considering insurance coverage, rates,
and what might happen if the friend were involved in an accident.