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HSFPP Weekly Update # 175—Need to Do Homework When Buying a Used Car

Message from Bob: One of our goals in developing these weekly financial lessons is to expose teenagers to print and Internet resources that will help them make wiser choices. As we all know, most teens want to buy a vehicle and they need the information to make the best deal they can. This week’s take-home assignment provides them just the information they need. It requires them to use the annual April auto issue of Consumer Reports, as well as the Web sites available from our link page for teenagers. These are great resources to help teens check used cars for a history of reliability and cost.

4-H agents who receive these updates should also note the new section at the end, a 4-H Club Lesson. Please let me know what information and resources you need so I can continue to adapt these updates to meet your needs. Teachers, credit union personnel, and home schooling parents, please also let me know what you need from us. Financial illiteracy is a tremendous problem in Kentucky and nationwide, so we want to meet the needs of the widest audience possible.

Message from Charles:Car-buying, which we cover often in the weekly updates, is an important issue not only to teenagers, but also to you, the educator and adult car buyer. Could you get a better deal on your next vehicle? This is first of a two-part series. This week we will look at buying a used vehicle; and, in Update # 176, we will discuss how to select the right insurance company and coverage for your needs.

 

Web Site Pick of the Week:

http://www.ca.uky.edu/fcs/hsfp/stlinkcarbuy.htm

Teens have found the Web links on this page of the Kentucky HSFPP Web site very useful when selecting and financing a used vehicle that is safe and reliable.

In the New$... Teens Need to Do Homework When Buying a Used Car (Part One)

by Charlie Sewell, Junior in Communications, University of Kentucky

Many teens, as soon as they have their driver’s license, want to buy a car. Often they know what kind they want and are likely to put more weight on the car’s looks than on other aspects, such as safety. A vehicle is the largest consumer purchase teens are likely to make; and it is, unfortunately, very easy to get taken advantage of when buying a vehicle, new or used. I would recommend, if at all possible, that you play it safe and buy a vehicle from a relative who has your best interests at heart. If you aren’t able to make such a deal, I would then look at the April issue of Consumer Reports, which tells you which makes and models have been reliable and which have been lemons. My friend Aaron did this before buying his 1993 Mazda MX-3 two years ago and has been happy with his decision.

Luckily, for me, the only car I’ve had was given to me by my mom’s cousin. I, unlike so many others, haven’t had to search used car lots and beg for loans from banks. But, if I had to buy a car today, I would use the tips from: www.carbuyingtips.com/first-time-buyer.htm. According to the Web site, the following are possible obstacles to keep in mind when buying your first car:

• “Lack of credit history is the biggest barrier, it is very difficult to get a car loan
• “Some car salespeople will rake you over the coals if you are a first time car buyer
• “Lenders won't approve car loans on used cars older than 5 years
• “Insurance rates for teens especially are very costly, often in the $5000 range” (NOTE: the range in Kentucky is more like $2000, except with new vehicles and muscle cars, which could go as high as $5000; we will provide more information on this in Part Two: Insuring a Vehicle.)
• “Insurance rates for single males under the age of 25 are also very costly
• “Now you have to deal with car repairs and other maintenance costs, new tires, etc.”

 

Even so, scam artists can take advantage of you in various ways, such as by rolling back the odometer and getting a fraudulent title in another state. And, if you buy from a legitimate dealer, you will find the seller more experienced than you, with a bag of legal tricks to make the deal more profitable for them, at your expense. In addition, you might want to use Carfax and other tracking services to alert you if the vehicle has been in a serious wreck or has a rolled-back odometer and ‘washed title’ (transfer of vehicle title from state to state by unscrupulous sellers until they have a clean title). In order to obtain a report, you will need the car's Vehicle Identification Number (VIN), usually found on the left side of the dash or next to the driver's side door post.

Either way, you need to do your homework before you buy and not afterwards. Finally, before purchasing a car, make sure you take a look at the car history, including:

• “The number of previous owners
• “If the car was ever involved in an accident
• “Any previous mechanical problems” (CarFax)
• “The maintenance history of the car”

 

(From: http://auto.howstuffworks.com/car-buying.htm)

I hope that the information above can help you in the process of finding the right vehicle for you. Make sure that a parent is always with you at a used car lot, and always do your research: check the car history, thoroughly question the dealer, etc. Also, before buying the vehicle, take it to a trustworthy mechanic to ensure you have a quality machine.

Sources: (1) “First Time Car Buying Tips For Teens & Safe Teen Driving,” ConsumerNet, Inc., 2006. http://www.carbuyingtips.com/first-time-buyer.htm

(2) “How to Buy a Car,” by Allison Klein, HowStuffWorks, 2006. http://auto.howstuffworks.com/car-buying.htm

(3) Consumer Reports, April 2006.

 

Discussion Questions:

Discuss your vehicle buying experiences:

1.) If you have bought a vehicle, what did you learn from the experience?

 

2.) What tips and pitfalls to avoid would you give to anyone who is going to buy a vehicle?

 

3.) What would you do differently the next time you buy a vehicle?

 

Follow-Up Activity:

Business class: Compare at least four vehicles you like and can afford (no Porsches!), using resources such as the April 2006 issue of Consumer Reports, Kelley Blue Book (http://www.kbb.com), and http://www.edmunds.com.

Then answer the following questions:

1.) Based on price and quality comparisons of the four vehicles, which one do you think is best? Why? 

 

2.) What are your most important criteria in selecting a vehicle to buy?

 

3) Which car is the safest and how important is safety to you in buying a car?

 

4-H Club Lesson:

Three Parts: Used Car Buying, Financing, Insurance

(You might also want to do the Follow-Up Activity above.)

Complete the activity on page 31 of the Consumer Roadmap book (Consumer Savvy series). Then answer the following questions:

1.) What is the difference between the base cost of your car and the cost with all the extra features? Do you need all those extra features? Are they worth the extra money?

 

2.) Why is buying a car a decision that you should consider carefully?

 

3.) Why is owning a car a large financial responsibility?

 

Using the retail values of the vehicles you chose, do the activity on comparing lenders at http://www.nefe.org/hsfppportal/files/10%20Portfolio_12.pdf. Credit Unions will often have their car loan rates posted.

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of the HSFPP weekly financial updates and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP and the weekly updates meet Kentucky core concepts. The Web site and weekly updates are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page