Wheeling and Dealing:
What to Know Before You Buy Your First Car
[Modified from the Bergen Record financial literacy curriculum]

Grades 11-12
Consumer and Personal Finance

Name: Dr. Barbara O’Neill, CFP
Agency: Rutgers Cooperative Extension
Name: Dr. Celia Hayhoe, CFP
Agency: Virginia Cooperative Extension
Lesson Plan: Phyllis Garnant

1. Develop a “needed” versus “wanted” features list in selecting a car for purchase. Compare costs for the “wanted” features.
2. Compare safety features on two or more vehicles for possible purchase.
3. Compare costs of buying vs. leasing an auto, as well as the advantages and disadvantages.
4. Identify the pros and cons associated with each method of purchase.
5. Investigate insurance regulations and identify potential costs associated with operating a motor vehicle in New Jersey.

One of the most expensive purchases people make, next to buying a house, is a car. In order to make decisions about purchasing a motor vehicle, teenagers need to think about wants versus needs, safety features, comparison shopping, an affordable amount to spend on the vehicle, methods of financing, and insurance coverage. Students completing the activities in Money…What Young Adults Need to Know on "Wheeling and Dealing." use a variety of resources to lead to decisions on purchasing motor vehicles. (http://www.nj.gov/njded/aps/cccs/career/resources.htm)

Jane and Tommy are twins who have just celebrated their 17th birthday. They both want to buy a new car. Their parents tell them that before they start looking at cars, they need to make a list of what is important in a car (such as a radio, air conditioning, or good gas mileage). Jane and Tommy use a "needs versus wants" chart to help them decide what is most important to them.

• They list all of the features they think they need or want and then list the additional cost for each item.
• They use the Tips for Buying a Used Car as a guide for shopping.

Jane wants a red sports car with a sun roof, CD player, leather interior, air conditioning and automatic features. Tommy wants a blue truck with four-wheel drive, four doors, 5-speed with automatic locks and windows, tinted windows and air conditioning. They both present their lists to their parents who give them each a copy of the Consumer Reports automobile special. They each must come up with three automobiles that match the features they are looking for.

• What safety features should Tommy and Jane consider?
• Find three cars that match each of Tommy or Jane’s features. Based on the safety ratings, which would you pick?

A week later Jane and Tommy come to their parents with a list of three different automobiles that match each feature they decided was important. Jane has babysat for local children as well as having worked summers at the local ice cream parlor. Tommy has a paper route and lifeguards during the summer. The twins have saved $3,000 each. Their parents are able to match them dollar for dollar on a loan. They then take them to a local car dealership to look at each of the three automobiles they have listed. Once Jane and Tommy have had a chance to test drive each of the cars on their list, their parents ask them which car, if any, they would like to buy. Jane and Tommy decide they really like one of the cars they have test driven. They check prices with the dealer, and their parents ask them, to check with three other dealers and compare prices.

• What are some advantages of visiting more than one dealership?
• Should Tommy and Jane decide right away which car they want?
• Compare the prices in the newspaper for the car you choose with the price on the Kelly Blue Book Web site. Is the price offered in the newspaper fair?

Two weeks later Jane and Tommy have both found the best deal for their car. They are ready to make the deals and bring their cars home. Jane and Tommy must then decide how to finance their cars. They both decide to go with the most common type of car financing, which is available through the dealership. Since they are minors, their parents will be required to co-sign the loan.

• What type of financing is the dealership offering in the advertisement?
• What other advertisements for financing can be found in the newspaper? Give three examples.
• Which type of financing should they choose? Give your reasons.

Now it is YOUR turn.

1. Use a chart to determine wants and needs in selecting features of a motor vehicle. Include personal needs that require car/vehicle ownership. Rank your reasons for wanting to buy a car.
2. Use Internet resources to compare crash tests of at least three types of cars. Hypothesize on how results of crash tests affect insurance costs in a short, written summary.
3. Compare costs of similar new and used vehicles, along with the advantages and disadvantages of each vehicle. (Vehicle could be student's dream car.) Review current annual car buying books, magazines, and/or Internet resources. See http://www.njcar.org/njcar/dsp_links.cfm for information. Create a five slide PowerPoint presentation to present in class.
4. Compare financial rates being offered by various banks, credit unions, or other lenders for new and used vehicle purchases. Compare the amount of payments depending on the price you could pay and amount of money paid initially. (See "Shop for the Best Deal When Financing a Vehicle worksheet.")

COSTS TO RUN THE CAR

1. Research regulations and costs for insurance in New Jersey. Interview an insurance agent about the type of insurance that would best fit a teenager's needs.
2. Create a monthly budget plan of income and expenses. Don't forget the gas!