1

Understand options and practices

for meeting transportation needs.

Personal Finance 6.02

2

ON The GO!!!!!!!!!!!!!!

How many hours of a typical weekday do YOU spend at home, and how many are spent “on the go” away from home?

How many hours of a typical weekend day do YOU spend at home, and how many are spent “on the go” away from home?

3

Journal Entry

Brainstorm and list the modes of transportation options used to get YOU where YOU need to go. Public transit -Public modes of transportation

available in cities---bus, subway, trolley Taxicabs Walking, bicycling Motorcycle, moped Carpooling - Grouping with others to share rides

to and from work

4

Key Terms

Handout Available -- STUDY

5

Introduction

Transportation is a part of everyday life. It comprises about 15 -20% of an

individual’s budget. Individuals need to assess and research

their transportation needs. If this means purchasing an automobile, it

should be well planned. Often, the automobile is the second most

expensive durable purchased. The first is a home.

6

Introduction

Consumers often make a common mistake, which is purchasing a vehicle based upon what looks good instead of assessing long term costs (gas mileage, insurance, etc.) and practicality.

Consumers may feel their vehicle choice is a symbol of prestige and/or importance instead of choosing an affordable and practical vehicle.

In order to avoid making this costly mistake, consumers should understand their needs versus wants before purchasing a vehicle.

7

Journal Entry

Draw a T-chart in YOUR journal and make a list of YOUR wants and needs for a vehicle of your choice.

Share results and discuss why certain things were classed as “needs” and others as “wants.”

Do YOU think YOUR list of wants and needs reflect consideration of: What YOU can afford Where and when the vehicle will be used Who will be driving the vehicle Where they live as it relates to the type of heating

and cooling system required in the vehicle.

8

Class Discussion

Discuss the advantages and disadvantages of owning an automobile as compared with a truck or a van.

9

Researching an Automobile

Read the Researching an Automobile information sheet 1.16.2.F1 located in your folder.

10

Class Discussion

If you could purchase any vehicle, what would you buy?

Why do you like the vehicle, its cost, and how they would purchase it.

Could you afford the rest of the vehicle’s expenses?

REMEMBER what YOU want in a vehicle and what is affordable and realistic may be two different things – needs versus wants.

Researching an Automobile

What should I look for?

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Transportation Part of everyone’s life 15 – 20% of an individual’s

budget Automobile is the 2nd most

expensive purchase, only after a homeYou will be researching an automobile to purchase. Transportation is a part of everyday life.

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Want to Buy a Vehicle? Consumers should plan their vehicle

purchase to avoid any costly mistakes Any large purchases should be

planned Places to purchase a vehicle:

•Dealership, private owner, internet

•Auto superstore – Dealerships with huge inventories of new and used vechicles

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

What kinds of mistakes can a consumer make when purchasing an

automobile?

Examples include: They purchase a vehicle on what looks good

instead of long term costs (gas mileage, insurance, etc.), affordability, and practicality.

Making an impulse buy.• Impulse buy – making a purchase without fully

considering priorities and alternatives. Not researching the vehicles before going to a

dealership. Spending more money than planned.

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Planned Buying Process

1. Prioritizing wants2. Pre-shopping research3. Fitting the budget4. Comparison shopping5. Negotiating6. Making the decision7. Evaluating the decision

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Considerations Make

•The brand of a vehicle Model

•A line of vehicles made by a specific company, such as Ford Taurus

Domestic•American-made

Imported •Foreign-mad

Options•Features available at extra cost or special prices

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 1 - Prioritizing Wants

Assess transportation needs and wants•Need: something thought to be a necessity

•Want: something unnecessary but desired Consider all automobile options as wants

•Prioritize the wants from low to high priority

•Prioritizing wants helps the consumer•Consider costs and benefits of different vehicle

options

•Consider the “big picture” of the vehicle purchase rather than a specific want (such as heated seats, color, engine size, etc)

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Prioritizing Wants – Questions to Think About

How will the vehicle be used? Where will the buyer be

living? How will the vehicle be

stored or parked? How much will it be driven? What options would the

buyer like in the vehicle?

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 2 – Pre-shopping Research

Research should be based on transportation wants

Complete this before visiting a car dealership or salesman

Helps the buyer to be informed about:•What they are looking for

•Vehicles in their price range

•Available options

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Ways to Perform the Research

Family & friends•Experiences with

different makes and models of different vehicles

•Likes, dislikes, and recommendations

Periodicals•Consumer Reports

•Federal Citizen Information Center

•Kelley Blue Book

•Motor Trend

•Car and Driver Access this information

at the public library and/or the internet

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Periodicals Consumer Reports–

http://www.consumerreports.org•Must subscribe to use Web site

Federal Citizen Information Center •http://www.pueblo.gsa.gov

Kelley Blue Book – http://www.kbb.com Motor Trend -

http://www.motortrend.com/ Car and Driver –

http://www.caranddriver.com

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Price Research Price

•Base price: vehicle price with standard equipment, no extra options

•MSRP: Manufacturer’s suggested retail price•Includes base price, price of options installed

by manufacturer, and their transportation charge

•Sticker Price•Dealer’s initial asking price

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Price Research continued

Price continued•Determine how much a dealer paid to

help decide which vehicles to consider and to negotiate a fair price•Consumer Reports, Kiplinger’s Personal Finance

magazine, and Edmund’s New Car Prices

•Used cars•Blue book price: dollar value given to the

vehicle based on its year and model

•Used as a guide for car dealers and banks for pricing trade-ins

•Kelley Blue Book

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Vehicle Options Research

General type of vehicle•Car, truck, 2-door, SUV, sporty

Make and model•Ford Taurus, Honda Accord

Safety•Braking and emergency handling, airbags

Reliability•Some specific models have high marks, may be

higher priced but will save on repair costs

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Vehicle Options Research continued

Fuel economy•Type of gas used, gas mileage

Power - A vehicle’s ability to accelerate for speed and Performance - A vehicle’s ability to handle, brake, and accelerate on the road •Driving on highways, steep hills, mountains,

snow, muddy roads, or in a city Comfort and convenience

•Size of headroom and legroom, cargo space

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Vehicle Options Research continued

Insurance•Chosen vehicle affects the price of

insurance; obtain a quote for the vehicles being considered

Other options•Power steering and brakes, manual or

automatic, air conditioner, rear-window defogger, radio/tape/CD player, type of tires, cruise control, sun roof, heated seats, power door locks and windows, etc.

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

New vs. Used Research New Vehicle:

•Not pre-owned

•Warranty

•Manufacturer options

•Wide selection

•Expensive

•Depreciation•Loss in the vehicle’s

value due to time and use (greatest cost)

Used Vehicle:•Cost less to buy

•Cost less to insure

•Avoid rapid deprecation

•Wide selection

•May offer warranty

•Returned leased cars

•Have an independent mechanic inspect any used car before purchase

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 28Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Depreciation Depreciation - the loss in the

vehicle’s value due to time and use.•Greatest cost of owning an auto.

•Largest automobile fixed expense.

•Federal tax guidelines assume a vehicle depreciates 52% during the first two years of an expected lifespan of five years.

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 29Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 3 – Fitting the Budget

“Can I afford it?”•Most important question

Amount the buyer can afford in his/her budget dictates the vehicle price

All costs must be taken into consideration before choosing a vehicle

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 30Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Fitting the Budget continued

Fixed expenses•Depreciation

• Insurance costs

•Loan payment and interest if financed

•Parking fees

•Licensing

•Registration

Flexible expenses•Maintenance

•Gas

•Oil

•Repairs

*Vehicle price is not the only cost involved

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 31Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Buy or Lease? Invoice Price

•The price the dealer pays the manufacturer

up front costs•Costs when signing a lease---deposit,

taxes, and registration fees Leasing

•Monthly payments in exchange for exclusive use of vehicle for a time

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 32Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Buy or Lease? capitalized cost

•Price for a leased car capitalized cost reduction

•Payment similar to down payment that results in lower monthly payment

lease term•Length of the lease---usually, 24, 36, or

48 months

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 33Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Buy or Lease? option to purchase

•At end of lease, the alternative to purchase the leased vehicle

residual value•The worth of a leased vehicle at the end

of the lease installment loan

•A loan to be repaid in equal payments

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 34Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 4 – Comparison Shopping

Comparing services or products to determine the best buy or quality product at a fair price

Allows the consumer to build upon the information learned in the pre-shopping research

*As the price of a vehicle increases, consumers are often not buying additional safety, capacity, or power, but instead style and prestige

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 35Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparison Shopping continued

Narrow the choices to a few specific makes and models with desired options

Visit the appropriate store to learn more information about each choice to make comparisons•Inquire about price, dealer incentives,

financing options, leasing, warranties, and service contracts

Test drive each potential vehicle

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 36Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparison Shopping continued

Goal of comparison shopping•Narrow the choice even further to

negotiate for the best deal

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 37Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 5 - Negotiating Process of deciding the actual terms

of the purchase and agreement between the seller and buyer

Obtain a firm price before discussing any other aspects including a trade-in

Compare prices from different dealers•Let them know you have done your

research and whether their price is high

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 38Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Negotiating continued Keys to all negotiations

•Be able to say NO

•Take the purchase to another business

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 39Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 6 – Making the Decision

The best place to decide on which vehicle to purchase is NOT the showroom where you are around the dealer•Take the information home to compare

all options After making the decision, return to

the dealer to close the sale

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 40Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Step 7 – Evaluating the Decision

Think about the things which went well and what did not•This will be helpful the next time a similar

purchase is made If the process was successful and you are

happy, compliment the seller If you have a complaint, make the

complaint known to the seller then move to the supervisor if necessary

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© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 41Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Lemon Laws Lemon

•A vehicle in and out of the repair shop with problems monthly

An estimated new 150,000 vehicles sold each year are lemons.

•Money Troubles, 2001, Leonard

All states have enacted lemon laws•Specifics vary state-to-state and are in

place to protect consumers

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 42Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Lemon Laws continued To fall under the lemon law

•New vehicle must have a substantial defect which cannot be fixed in a reasonable time

•Defect remains unfixed after four repair attempts or the vehicle remains in the repair shop for a total of 30 days

This allows the consumer the right to a refund or a new vehicle

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 43Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Lemon Laws continued What should you do if you feel you

have purchased a lemon?•Contact the state’s attorney general

office to request information on the state’s lemon laws and how to use them if they have purchased a lemon

1.16.2.G1

© Family Economics & Financial Education – Revised December 2004 – Transportation Unit – Researching an Automobile – Slide 44Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Conclusion Before purchasing a vehicle, follow the

planned buying process to avoid a costly mistake

1. Prioritize wants2. Pre-shopping research3. Fit the budget4. Comparison shop5. Negotiate6. Make the decision7. Evaluate the decision

activity

What Do I Want/Need In A Vehicle?

activity

Researching an Automobile

activity

Check It Out, Do the Math, Buy the Vehicle

Review Meeting Transportation Needs

48

Resources

Auto Buying Tips – http://www.auto-buying-tips.com This site has many vehicle lists including the top 10

vehicle lists for cars, trucks, best selling, used cars, etc. Also lists fuel efficient vehicles.

Autobytel – http://www.autobytel.com This site allows a consumer to search for a vehicle

by make, category, price, or payment. It will categorize the vehicles by compact cars, sports cars, trucks, SUVs, etc.

When searching by payment, the consumer can change the loan variables and down payment amount to fit their personal needs.

49

Resources

Bankrate – http://www.bankrate.com This site has a variety of automobile

information including a list on APRs for each state and loan calculators.

Car and Driver – http://www.caranddriver.com The magazine’s Web site with current

vehicle information. Information is not guaranteed to be unbiased.

50

Resources

Cars Direct – http://www.carsdirect.com This site offers a “What Can I Afford?” calculator. The consumer enters the monthly payment amount

they can afford, the down payment, credit rating, length of the loan, and sales tax.

It will calculate the highest price of a vehicle affordable for a loan or a lease.

It also allows the consumer to enter their annual gross income and then it automatically calculates a monthly payment amount and the highest price of a vehicle affordable.

The consumer can then click on a button which will show them a list of vehicles in the price range.

51

Resources

Car Prices – http://www.carprices.comThis site allows consumers to build a

new car and give price estimates, research the vehicle, and compare it to other vehicles.

While building the vehicle, the price is listed for the available options. (dream vehicle)

52

Resources

Cascade Bank – http://www.cascadebank.com This site offers loan calculators and a loan

application. Consumer Reports –

http://www.consumerreports.org Unbiased information; the most recent April

issue is dedicated to automobiles. Edmunds – http://www.edmunds.com

A site with a variety of automobile information including prices, review, advice, etc.

53

Resources

Federal Citizen Information Center - http://www.pueblo.gsa.gov This site has many informational and fact sheets on

a variety of automobile topics. Kelley Blue Book – http://www.kbb.com

This site lists the blue book values, vehicle reviews, tips and advice, etc.

Motor Trend - http://www.motortrend.com/ The magazine’s Web site with current vehicle

information. Information is not guaranteed to be unbiased

54

Resources

Yahoo! Auto Loan Center – http://loan.yahoo.com/a/autocalc.html This site has many different loan

calculators to find and compare options to fit one’s budget.

The “What Can I Afford?” link allows consumers to enter their down payment amount with loan variables to give an affordable vehicle price for consumers to use as an estimate when looking for a vehicle.

Automobile Insurance

Managing the Risk

1.16.1.G1

© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 56Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

1.16.1.G1

© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 57Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

What is Risk? Risk –

Uncertainty about a situation’s outcome

Unpredictable events which can lead to loss or damage

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 58Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

What is automobile Insurance?

Automobile Insurance Arrangement

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

Protects individuals against risk from automobile accidents

1.16.1.G1

© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 59Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 60Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 61Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 62Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Four Types of Coverage1. Liability Insurance2. Medical Payment Insurance3. Uninsured/Underinsured Motorists

Insurance4. Physical Damage Insurance

Comprehensive Collision

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 63Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Liability Insurance Liability Insurance

Covers injuries or damage caused to other people or their property

Two types of liability occur from owning and operating a vehicle:

1. Bodily Injury – driver or car owner is held legally responsible for injuries suffered by another person

2. Property Damage – driver or car owner is held legally responsible for damaging another’s property

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 64Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Liability Insurance continued

Liability insurance is the minimum amount of insurance required by law

Does not cover losses suffered by the insured or property damage to that driver’s car if he or she caused the accident

Must have at least the state minimum for liability insurance

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 65Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Liability Insurance continued

Policy limits for liability are usually quoted with three figures such as 25/50/10 Each figure represents a multiple of $1,000

25 = $25,000 Per-person bodily injury limit $25,000 is the most which will be paid for

any one person’s bodily injury liability losses from an accident

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 66Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Liability Insurance continued

50 = $50,000 Per-accident bodily injury limit $50,000 is the most which will be paid for

all bodily injury losses from an accident 10 = $10,000

Per-accident property damage liability limit $10,000 is the most which will be paid in

property damage liability from an accident

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 67Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Medical Payment Insurance Medical Payment Insurance

Covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault

Covers insured family members injured as passengers in a car or injured while on foot or bicycle

Pays for hospital and medical bills Some pay for funeral expenses

Not required in all states

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 68Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Uninsured/Underinsured Motorists Insurance

Uninsured/Underinsured Covers injury or damage to the driver,

passengers, or the vehicle caused by a driver with insufficient insurance

Situations where this is needed: Hit-and-run accidents (unidentified driver) Accident with an uninsured driver Accident with someone with insufficient

insurance to cover the losses Not required in all states

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 69Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Physical Damage Insurance Physical Damage Insurance

Provides protection for damages caused to the vehicle

Two types of coverage are available:1. Comprehensive Coverage – includes all

physical damage losses except collision and other specified losses. Usually includes deductible. Losses covered include:

Theft, vandalism Fire, ice, windstorm, or hail Glass breakage Contact with animal

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 70Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Physical Damage Insurance continued

2. Collision Coverage – covers a collision with another object, car, or from a rollover Paid regardless of fault Generally covered when driving

someone else’s car with their permission

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 71Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Optional Protection Towing Coverage

Pays the cost of having a vehicle towed to receive repairs

Rental Reimbursement Provides a rental car when the insured’s

vehicle is being repaired after an accident or if the vehicle was stolen

May provide only part of the funds

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 72Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 73Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 74Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 75Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

1.16.1.G1

© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 76Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

1.16.1.G1

© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 77Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

1.16.1.G1

© Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 78Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Save Money on automobile Insurance

Shop around Select appropriate coverage and

limits Avoid expensive or high-

performance vehicles Take advantage of discounts

79

REVIEW

Automobile Insurance

80

Options for Automobile Insurance

Basic types of auto insurance Liability insurance covers when liable for an accident where

others are injured or killed Collision insurance pays for loss or damages to insured

person’s car due to accident Comprehensive physical damage insurance pays for losses due

to fire, theft, falling objects Medical payments coverage pays insured’s medical

expenses resulting from accident No-fault auto insurance pays claims regardless of who is at fault Underinsured motorist insurance covers difference between

liability coverage and underinsured motorist and the amount of losses

Rental reimbursement covers costs of renting a car while yours is being repaired

81

Options for Automobile Insurance

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 State of residence Number of cars insured Cost of vehicle---higher rates for luxury cars Whether young driver has completed a driver’s

education course Amount of deductible---amount insured pays before

insurance company pays on claim

82

Activity

Automobile Insurance – use may PowerPoint 6.02 to complete.

Factors which Influence Insurance Rates

Automobile Insurance Review Factors Affecting Automobile

Insurance Crossword

83

Journal Entry

What I learned about buying an automobile.

What I learned about Auto Insurance.