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What is the leading cause of people experiencing debt and mismanaging money?

Hosea 4:6

Deuteronomy 8:18 “But remember the Lord Your God, for it is He who Gives you the ability to produce wealth,…”

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You have the ability to attain money…but it does you no good if you attain it and have no knowledge of how to manage it.

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This is what happens to your money when you don’t know how to manage it.

Financial literacy is Financial literacy is the ability to make the ability to make informed judgments informed judgments and to make effective and to make effective decisions regarding decisions regarding the use and the use and management of management of money. money.

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The Big Decision

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The Big Decision Cont’d

The 1st and one of the most expensive choices you will make.

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Buying a car will most like be…

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5 Questions to ask yourself before you buy a car…

Size Advantages Disadvantages

Small4 passengers

Excellent fuel economyLow DepreciationBest maneuverabilityLow upkeep cost

Limited passenger & trunk spaceVulnerable to accidentsRough ride

Compact5 passengers

Good fuel economyGood maneuverabilityModerate upkeep costMore passenger & trunk room

May depreciate more than small carVulnerable in accidentsRougher ride than a larger car

Midsize6 passengers

ManeuverabilityFuel economySmooth rideEnough room for familyGenerous trunk space

Higher initial costHigher upkeep cost Fuel economy not as good as smaller car

Large6 passengers

Good Highway performanceGood passenger &trunk spaceMost collision protectionHeavy towing capability

Poor fuel economyHighest initial costHighest upkeep costHighest depreciationHighest insurance rates

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What are the Pro’s and Con’s for the Car I want?

Cost of the car, which include:

• Initial price of the car• Cost of financing• Registration fee• Taxes• Insurance• Gas• Oil• Maintenance & repairs• Parking fees• Tolls• Depreciation of car

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More Things to Consider…

Installment charge or the carrying charge – includes interest On the money being borrowed & the handling fee for extra paperwork

Financing – arranging to make equal monthly payments or installments for a certain period of time usually 30 -60 months

Car loan – when you don’t have enough money to get the car, a car loan is attained through a bank or through the car dealerDo not sign any contract until you have read and understood it completely. Be sure that the car you are buying is correct, the total cost, installment Charge, annual rate of interest, and number of payments is listed. Check for Any hidden charges! Remember that after you have signed any contract IT ISLEGALLY BINDING!

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One of the major costs of owning a car is depreciation. When you first drive your car off the car lot it has depreciated in value.

Average annual depreciation = total depreciation years car owned

Jake Williams paid $18, 300 for his car 3 years ago. The Car is worth $12,540 now. What is the average annual depreciation?

$18,300 Original Cost-12,540 Present Value$5,760 Total Depreciation

To find the total depreciation, subtract thePresent value from the original cost

To find the average annual depreciation, divide the total depreciation by the number of years the car has been owned.

$1,920 Avg. annual depreciation 3 $5,760 13

Depreciation

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Having Insurance is a must!!! Here is what you pay if you don’t have insurance:•Fine of up $1000 •Car automatically gets impounded•Mandatory 60-90 day license suspension

TYPES• Liability – covers the financial responsibility of a driver if his car should cause death or injury to another person• Collision – pays for the cost of repairs in an accident which is your fault. If you only have liability and the accident is your fault the insurance company will pay for the other car…leaving the damage to your car up to you• Comprehensive – covers losses not related to traffic accidents such as theft, vandalism, falling objects, flood etc.

Factors that affect insurance: Age, Gender, Drivers safety record, type of car

Insurance

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Good Grades are great for insurance!Maintaining a ‘B’ average gets you a 25% reduction in the cost of the policy!Because William Ferguson is a teenager, he pays $1020 per year for liability insurance. If he maintains a ’B’ average he receives a 25% reduction in the cost of the policy. What is the cost of the reduced premium?

25% of $1,020 = .25 x $1,020 = $255

$1020-255$765 is the new cost

Insurance

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Automobiles are made to have an average road life of roughly about 100,000 miles, but the actual life of a car depends on how well you take care of the car.

Repair or Replace List

Oil change – every 3,000 miles or every 3 months Brakes relined - every 15,000 to 25,000 milesShock absorbers, mufflers, tires – 15, 000 to 50, 000 milesTires – 15,000 to 50,000 miles (depends on how good the tire is)

Replace: Parts such as the water and fuel pumps, starter, generator, carburetor, thermometer, & spark plugs will occasionally need to be replaced.

Trunk EssentialsAdjustable Wrench PliersFlares ScrewdriverJumper Cables Spare Tire, JackFlashlight Tire Pressure GaugeWork Gloves Work gloves, Blanket

Maintenance & Repair

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Remember the cost of a car is not just the selling price. To Know if you can afford a car, you need to figure the annual operating cost which includes the sum of all annual expenses.

Model ProblemDarriel Johnson has a car that originally cost $18,000. Her annual depreciation rate is 13%, and she pays 7% interest on the original cost of the car. Her annual expenses for repairs, gas, oil, maintenance, fees, and insurance are $1,600. What is her annual operating cost?

13% of 18,000 = $2340 Depreciation7% of $18,000 = $1,260 Interest charge + $1,600 +Repairs, gas, insur. Etc. $5,200 = Annual Operating Cost

Annual Operating Cost

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Some Individuals or businesses prefer to lease. A lease is a contract arrangement from 1-4 years during which monthly payments are made. As many as one in five new cars are leased rather than bought.

Just because leasing is popular…

does not make it a smart deal!There are two types of leases: Open-end and Closed-end

Open-end lease is a rare lease in which the person whom the car is leased must purchase the car if it depreciates more than expected. (These should be avoided)Closed-end lease is a lease in which the car is simply returned at the end of the lease agreement.

Length of Lease

Small Car (per month)

Compact (per month)

Midsize (per month)

Large (per month)

One year $249 $319 $399 $469

Two years $219 $289 $359 $409

Three years $199 $259 $309 $369

Leasing

Closed End Lease Pricing

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The amount of monthly payment depends on the following:•The kind of car leased•The length of the lease•Which party is responsible for maintenance, repair, & insurance

The person leasing the car can be charged extra at the termination of the lease if the car was not properly maintained or if the agreed mileage was exceeded.

You end up spending more money driving and repairing a car that you won’t own! The money you spent leasing…you could’ve saved or purchased a new or certified used vehicle.

Why Leasing is Not The Best Option