Fast Fact Notes – Bonus Chapters 

Buying a Car and Insuring It
“Get Your Motor Running…”

You may have rented your own pad and have a job or college in mind – now you just need to commute between them!

So if you haven’t already bought and insured a car, it’s probably on your “to do” list. But before you even consider a car purchase, it’s important to determine if you can really afford one.

To determine what you can afford and get a rough idea of payments, simply divide the cost of a car by 33. This will give you the approximate monthly payment for a three-year loan. For example, an $8000 used car divided by 33 = $242 a month.

Additionally, it is vital for your budget that you get a fairly accurate estimate of the cost of gas, insurance, and maintenance. Consider how many miles per gallon the car will receive. Hint - older cars require more maintenance. Now take a look at your budget – can you afford the payment and expenses?

Buy new, buy used, lease?
Buy a used car, as opposed to buying a new car or leasing. The big drawback of buying a new car is that you lose 20-30% of the value when you drive it off the lot – it changes from “new” to “used” in seconds!

What car fits you?
Understand your true needs in a car. These are things you must have to get around safely. Do you need 4-wheel or all-wheel drive for driving in snow or for off-roading on dirt tracks? Perhaps gas mileage is important - do you drive 80 miles per day? If you live in Alaska, you probably wouldn’t purchase a convertible, right?

Car Checklist:
Do your research and compare the cars that fit your needs and budget.

• Be sure to check out Consumer Reports for safety ratings and repair records.
• Checking out dealerships on-line will give you an excellent idea of prices and features on specific models.
• Pre-qualify for a loan with your bank. Your bank should offer you good terms, but when you get to into final negotiations at the dealership, see what terms they can offer on the loan. You will be able to make a comparison.

Money Pros understand what used car best suits their needs, and purchase a car that fits in their budget.

 

The best time to buy
The end-of-year and just before the next model year is released are great times to find a good deal. Additionally, at the end of the month, sales people need to make quota, so they’ll bend a little more on the price to sell you a car.

Negotiating a good price -

• First, before you even begin negotiations, it is important you conduct thorough research. Know what the MSRP (manufacturers suggested retail price) is and what the dealership paid for the vehicle.
• Establish a clear dollar amount you are willing to pay for the car and write it down.
• Understand the sales person. It is important to realize the salesperson is there to earn money. He or she needs to sell cars for all the same the same reasons you need to work. 
• Identify and resist the sales person’s attempt to emotionally connect you to the car.
• Be patient and spend a lot of time with the sales person. The more time he or she has invested in you, the more he or she wants to make a sale.
• Build rapport and try to get to know your salesperson on more of a personal level.
• Don’t be afraid to try to get the best deal. The experience can be intimidating, but remember you can always walk away if the deal is not right.

Other quick tips

• Take written notes.
• They will try to up-sell you – It’s not only burger chains that try to upsize your order. Don’t let them.
• The Right to Leave - If you do not get the price you want or can afford, you still have the right to leave. Do it.

Getting a car loan
When starting out, never take a car loan that is over three years long. You could get a longer loan to reduce your payments, but stick to the three years. This way you will own your car free and clear in three years instead of turning this into the never-ending purchase.

Car loan lenders
When qualifying for a car loan, lenders look at several key areas.

• They want to make sure you can repay the loan.
• They will review your credit report and verify your income.
• The more cash you can put down up front, the less you need to borrow. It will make it easier to qualify for a loan.

Money Pros get car loans with payback terms that are three years or less. They always get loan quotes from their bank prior to shopping for a car.

 

Buying privately
Not everybody buys from a salesman – sometimes you’ll see a car in your neighborhood with a “For Sale” sign and you might be tempted.

If you buy a car from a private individual,

• Safety first - Meet in a public area. If at night, make sure it is well lit.
• Mechanically fit? - Have your mechanic inspect the car for problems.
• Negotiation - Follow the same negotiation steps as with the dealer, but there are other considerations. Once you have a deal, you need to make sure the transaction is completed properly.
• Make sure to get the Title of Ownership from the seller. Closely review the title document. Make sure it is filled out completely, and simply do not pay the previous owner until title has been signed over to you.

Auto insurance
It is vital you get and maintain car insurance. Without it, you are taking on a huge amount of risk – to yourself, others, and your future finances.

Shopping for insurance can take some time, but with the Internet you can get lots of quotes fast. However, you need to read the policies and special provisions carefully to make sure you are comparing comparable insurances. One place to start can be the company that your parents use. 

To help to lower your insurance cost, try the following:

• Good driver discounts - Your insurance premiums will increase if you get speeding tickets. Get too many tickets, you may not be able to find insurance at all.
• Good grades - As a teen driver, good grades will lower your insurance rates with many companies.
• Good car - Young adults that purchase sports cars or 4-wheel drive vehicles pay more. Insurance companies figure you’ll be driving fast or off-road, and they don’t want that.

This explains why Mom and Dad do not want you to drive the new BMW, but prefer you take the Honda. It costs a bundle to insure you as a driver in a flashy car.

Summary of Web sites mentioned in this section (pages 2, 3)

Moving Up, Moving Out
Renting

As you make your first moves on your own, you’ll also likely be looking into finding your own place to stay.

Renting that first apartment or house is a big step. This is an exciting time when you might be experiencing your first real freedom from parental rules. You will be in charge of the household, and the decisions you make will directly affect you.

How to locate a place to rent
There are several ways to find a house or apartment to rent. The first step is to figure out how much you can afford. Refer to Chapter 4 and use the budget software to calculate the rent you’re able to afford.

What is included?
When looking at potential places to rent, you need to determine what is included in the payment. Utilities such as cable, electric, gas, and water are all things that need to be paid, and it is important to find out if you’re the one paying them, or if your rent includes these bills. Also find out if the rent includes a parking spot, or if that is an added expense.

Where to start
Once you have budgeted for this, you can begin by asking friends and family if they know of any places available for rent.

Newspaper and online rental sites make it easy to find vacant homes that are looking for renters. You can always just drive around the area you’re interested in and look for “For Rent” signs.
           
Research and understand the area, since some streets may look great during the day, but you wouldn’t feel safe walking around at night. Where’s the local mall? Do your friends live close? Make sure you understand the area, and visit it several different times before committing yourself.

Security deposit
Security deposits are intended to protect the property owner in case you, as the renter, cause damage to the property. It is typically equal to a full month’s rent and is due prior to your move in date, along with your first month’s rent. In other words, before you move in, you will have approximately two months of payments due.

Money Pros know what expenses to expect, and budget accordingly.

 

Roommates
There is a good chance you will need a roommate to keep rent at an affordable level when you’re on your own for the first time. It’s important you establish ground rules before looking for a place together.

Discuss everything that matters to each of you - from how often you should clean to how many parties you will have, and how many nights a boyfriend/girlfriend can stay over. This should be discussed before you come to any agreement and start looking for places to rent.

Also, make sure to list everyone that will be living there on the rental contract. If only one person is listed on the contract or rental agreement, he/she carries an unacceptable risk. Furthermore, those who are not on the lease are free to move, leaving the others with a higher rent to cover.

Rental application
Fill out the rental application completely, accurately, and neatly - this is the first impression the landlord will have of you. When you meet the property manager or landlord at the property, look sharp and act professionally. You need to convince them that you are responsible and will take care of the property.
contract. The first thing you will need to do once you have si

Your first place!
If you follow these steps, you’ll be on solid ground when you sign your gned is to have the utilities turned on in your name. Simply contact the cable, phone, gas, and electric companies to have service established. The numbers for these companies can be found online, inside the front cover of the white pages, and in the yellow pages. It can take a few days to set up, so make sure you take care of this before you move in.

So that all people who are renting share equal liability, use each person’s name when turning on the utilities. Additionally, make sure to pay your utility bills on time. If for any reason you are unable to do so, contact the utility company immediately, or risk having your utilities turned off. If your utilities are disconnected, you will owe a large deposit to get them turned on again.

Renters insurance

Renters insurance can protect you in the event that of a theft or fire, and is relatively inexpensive. Take an inventory of what you have and what it would cost to replace it. If you have designer clothes, computers, furniture and other items that would cost you a lot to replace, take a look into renters insurance.