FIN 200 Chapter 8 SmartBook

The loss of a vehicle's value due to time and use and the largest fixed cost of a new car is called [_____].

Blank 1: depreciation

The [_____] law protects car owners after four attempts to get the same problem corrected or when the vehicle is out of service for more than 30 days within [_____] months of purchase or within the first 12,000 miles.

Blank 1: lemon Blank 2: 12 or twelve

The condition of upside-down or negative equity can result with automobile financing when a long payment period is chosen. When this happens, the market [_____] of the car is less than the outstanding loan amount.

Blank 1: value, price, or cost

One of the factors that influences the price of buying a used car is capitalized cost.

False

True or false: A lease trap will usually not happen if you ignore the total cost of the lease agreement and focus only on the monthly payment.

False

True or false: The monthly payment is the best indicator of the true cost of a car loan.

False

The common sources of information regarding products during the pre-shopping phase include personal [_____] , media, and independent testing agencies such as Consumer Reports.

contacts, preference, research, recommendation, networks, preferences, recommendations, or network

The APR is the best indicator of the true [_____] of credit.

cost, price, or value

You should not indicate borrowing plans until the price is set on a new car because you should separate the [_____] of the car from the negotiations over price.

financing, payment, finance, payments, borrowing, or borrowings

Depreciation is the largest ______ cost of a new vehicle.

fixed

Which of the following items is not a variable in the cost of a lease? - monthly payments and number of months - capitalized cost - residual value - sticker price

sticker price

Which of the following are given in the textbook as good sources for fair pricing on used cars?

Kelley Blue Book Edmund's Used Car Prices

The two factors that influence driving costs are the:

size of the car and the number of miles you drive.

Which of the following is not a drawback of leasing an automobile?

small cash outflow

Banks, credit [_____] , and consumer finance companies are all businesses that are sources of car loans.

unions or union

Select all that apply Which of the following automobile driving costs are categorized as fixed ownership costs? - Depreciation - Registration fees - Insurance - Repairs - Parking costs and tolls - Gas - Interest on car loans - Oil

- Depreciation - Registration fees - Insurance - Interest on car loans

Select all that apply Which of the following automobile driving costs are categorized as variable operating costs? - Parking costs and tolls - Insurance - Gas - Repairs - Registration fees - Oil - Interest on car loans

- Parking costs and tolls - Gas - Repairs - Oil

Which of the following are sources of automobile loans?

- banks - consumer finance companies - credit unions

Lemon laws protect car owners after four attempts to get the same problem corrected or when the vehicle is out of service for more than [_____] days within 12 months of purchase or the first 12,000 miles.

30 or thirty

Lowballing and highballing sales techniques should be avoided when purchasing a vehicle.

True

True or False: At the end of the lease, if the residual value of the vehicle is greater than its market value, then you should return the car to the leasing company.

True

True or False: Monthly car lease payments are often less than monthly car financing payments.

True

True or false: A lease trap can happen when you negotiate the monthly payment on a lease and ignore the capitalized cost of the vehicle.

True

True or false: Other than price, the product attributes to be considered when evaluating brand alternatives are performance, design, and warranty.

True

True or false: The drawbacks of leasing an automobile include no ownership interest in the vehicle and costs for extra mileage, for certain repairs, and for turning the car in early.

True

True or false: The driving costs of an automobile are influenced by the number of miles you drive and the size of the car.

True

True or false: Two important sources of used car prices are Edmund's Used Car Prices and the Kelley Blue Book.

True

True or false: Well-maintained and certain high-quality vehicles depreciate at slower rates than vehicles not receiving the same level of care or not consisting of the same high quality.

True

True or false: When attempting to trade in a current car for a new car, it is best not to mention a trade-in vehicle until the cost of the new car has been settled.

True

Dealing with the person who has the [_____] to give you a lower price is a vital factor of negotiations.

authority, power, ability, control, or jurisdiction

One of the best sources of information about the product you are considering buying is:

independent testing organizations.

A possible advantage of [_____] an automobile is the smaller upfront cash outlay.

leasing or lease

When you need repairs not covered by warranty, you should investigate, evaluate, and ______ a variety of servicing options.

negotiate

The difference between the sticker price and the dealer's cost is usually the range available for ______.

negotiation

When contracting to have repairs made to a car, it is wise to follow a process similar to when making the original purchase. Such a process of investigation, evaluation, and [_____] can help minimize the ownership costs of a car.

negotiation, negotiating, or negotiate

The range of negotiation is determined with a new car by knowing the [_____] price and the [_____] cost.

Blank 1: sticker, list, or listed Blank 2: invoice, dealer's, dealers, actual, seller's, sellers, or dealer

Select all that apply Which of the following is a negative equity situation with a car loan? - You sell the car for exactly what you owe on it. - The loan amount owed is more than the value of the car. - You sell your car, pay off the car loan, and walk away with money in your pocket. - Upon selling your car you still owe the bank money on the car loan (over and above your selling price).

- The loan amount owed is more than the value of the car. - Upon selling your car you still owe the bank money on the car loan (over and above your selling price).

Select all that apply Which of the following are questions you should ask yourself when you are considering a major purchase? - Which brands should I consider? - Do the neighbors have one? - Can I delay the purchase? - How should I pay for it?

- Which brands should I consider? - Can I delay the purchase? - How should I pay for it?

The factors that influence the price of a used car include ______.

- condition - demand for the model - number of miles - features and options

Well-maintained and certain high-quality vehicles [_____] at slower rates.

depreciate

Select all that apply Which items below affect the cost of an automobile lease? - interest rates on a new car loan from both the bank and the dealer - residual value—the projected value at the end of the lease - the monthly payments and the number of months - capitalized cost - money factor—the interest rate paid on the capitalized cost - manufacturer rebates

- residual value—the projected value at the end of the lease - the monthly payments and the number of months - capitalized cost - money factor—the interest rate paid on the capitalized cost

Many lenders will ______ you for a certain loan amount.

preapprove

Products such as real estate or automobiles may be purchased using [_____]negotiation.

price or cost

When asked how much you can afford each month for a car, be sure to ask:

how many months.

If the dealer is not willing to pay enough for your used car as a trade-in, you should:

sell the old car to an outside party.

You are considering a car with no down payment and monthly payments of $350 for 48 months and an estimated value at the end of the loan term of $4,000. A comparable model can be leased for $325 a month for 36 months with end-of-lease costs of $1,400. Which arrangement should you choose?

the loan and purchase because its cost is lower.

You are considering a car with no down payment and monthly payments of $550 for 48 months and an estimated value at the end of the loan term of $8,000. A comparable model can be leased for $550 a month for 36 months with end-of-lease costs of $1,800. Which arrangement should you choose? - the lease because the cost is lower - the loan and purchase because its cost is lower

the loan and purchase because its cost is lower