How to Buy a Car/Role-Playing Assignment

Instructions
In this activity, you will follow Principles of Effective Car Ownership, from Financing a Car to
Comparing New vs. Used, and the Purchasing Process will help you make better decisions
when purchasing a car. Some of you have never bought a car before. Others have personal
experiences of buying cars. (If you have a physical limitation that prevents you from driving or
live in a country where you don’t own a car, please contact your instructor for an alternative
assignment.)

Instructions: Respond to each of the following. Type your answers directly into the worksheet.
Save your work and submit it in I-Learn.

Understand the total cost of ownership

1. What do you consider to be an excellent credit score and why?

760 and above is what I consider to be an excellent credit score primarily because that’s what
banks consider to be an excellent credit score.

2. Develop an excellent credit score. What are you currently doing to build your
credit score?
I currently have an excellent credit score. To further build my credit score, I have 2 credit
cards that I always pay off each month.

3. Find two (2) cars you might want, on websites such as www.cars.com or
www.autotrader.com or other car website. Why those two (2) particular cars?
Car 1: VW Jetta Car 2: Hyundai Tucson

I currently have a VW Jetta. It’s a 2016 and This is a car that my husband has been
I’ve had it since 2016. It’s given me no wanting to get. It’s a safe family car.
troubles and I’ve had to do very little
maintenance on it.

4. If you were really buying a car, whether new or used, you would ask sellers
several questions to determine the condition of each car. What 2 questions would
you ask the sellers of these two (2) particular cars?
1. Why are you selling the car?
 2. What is the average cost of it’s upkeep? (ex: price of oil change)

5. Run the CARFAX Reports at www.carfax.com. Because CARFAX Reports cost money,
you do not have to run the actual report for this assignment. Identify what information
you can find on a CARFAX report that would help you make your decision. List 5 of the 7
items listed in the textbook that you can find on a CARFAX report.
Carfax reports give you a detailed vehicle report on the cars. These reports tell you who
previously owned the car, where each owner bought the car, accident history, repair history,
and maintenance history. All of these can go a long way in helping someone determine if they
should buy a car.

6. Determine five-year costs to own both cars at www.edmunds.com using the “True
Cost to Own” (TCO) Calculator (this includes depreciation, taxes, licensing and fees,
insurance premiums, financing charges, fuel costs, scheduled maintenance, and
repairs). What is the TCO for both cars?
Car 1: 2018 VW Jetta Car 2: 2020 Hyundai Tucson

Depreciation: $10,575 Depreciation: $10,915

Financing: $1,753 Financing: $2,442

Taxes & Fees: $1,277 Taxes & Fees: $1,695

Fuel: $10,339 Fuel: $13,633

Insurance: $2,416 Insurance: $2,369

Repairs: $3,411 Repairs: $549

Maintenance: $7,684 Maintenance: $4,002

TCO: $37,455 TCO: $35,605

7. Determine fair prices at www.kbb.com. Knowing both the high book value and the low
book value gives you some flexibility when negotiating the price. What are the high book
prices and the low blue book prices for each car?
Car 1: 2018 VW Jetta Car 2: 2020 Hyundai Tucson
 High Book Price $15,811 $23,563

Low Book Price $13,662 $20,357

8. Using the information from your research above, decide which one of the two (2) cars
you would choose and tell why.
The Hyundai is more expensive upfront but has a cheaper TCO than the VW. I think I would
go with the Hyundai because it will be a car that a family can grow in and explore in rather
than the Jetta.

9. What do you think is a fair price for the car you chose? What is a reasonable offer that
is slightly below that fair price that you would offer?
I think $21,000 is a fair price for the Hyundai Tucson. It’s in the middle of the high and
low book price

Compare interest rates from multiple institutions

Institutions Interest Rate

Bank of America 4.74%

Mountain America Credit Union 5.49%

Dealership [insert name of dealership here] 5.38%

Bankrate.com 5.99%

What is the best interest rate you found? 4.74%

Which institution offers the best rate? Bank of America
What is the term of the loan? 60 months
What fees are there? None that I could find.
With the best interest rate you found, search online for an auto loan calculator. Fill in the
requested information:
How much would your monthly car payment be if you were to finance your vehicle?
$372.86
Does it fit into your budget? Why or Why not?
This wouldn’t fit into our current budget because we simply don’t have $300 a month to go
towards a car payment alone.
If not, what price of vehicle would fit?
I think something in the $200 range would be better.

Compare this cost of buying vs. leasing. Use this website:

https://www.consumerreports.org/buying-a-car/leasing-vs-buying-a-new-car/ to decide if
leasing or buying is better for you. Report your results here:

10. Write a paragraph on the negotiation process using information from the textbook
and class discussion.
It’s important to know the fair market price and what you’re willing to spend before talking with a
seller. If you don’t know either, you could agree to pay more than you can budget for or more
than the car is worth. Walk away if it’s out of your price range. Walk away if you’re feeling
hungry, tired, angry, or pressured.

11. A thorough inspection of the car by a mechanic is needed. Who would you take it to
and what specific things would you have them look for?
I would take it to Point S in Rexburg. I would have them do an all over inspection to make sure
there aren’t any major problems with the car that haven’t been disclosed. I would also [purchase
the CARFAX document on the car while I wait.

12. Look up the latest model of the car you chose to buy.
What is the cost of a NEW car compared to the one you chose? About $10,000 more than
the used car.
By what percent has the car depreciated and in how many years?
Cost of New Car? $30,563
How old is the car? 2022
Depreciation Percent?

Name 3 things you learned from completing this exercise:

1. There is a lot of information needed to determine if a car is worth the sacrifice and
budgeting.
2. I didn’t know what most of these steps were before doing them.
3. It’s better to walk away than to get roped into a car payment that you don’t need or can’t
afford.
Wisely handling the automobile purchase decision will contribute significantly to your wise
financial stewardship. It will help you live joyfully within your means. We hope that this important
financial decision of buying a car now seems less intimidating and more exciting!

Please do not forget about the Role-Playing Assignment in the instructions! You can
write your answers below or start with a new word document.

1. In the video, what strategies did the salesperson use?

a. He talked the car up as he was sharing the selling price. He also stated how he
would love to see the couple in a car that fit them so well.
2. In the video, what did the couple do well?
a. They didn’t budge on their spending limit. They knew $15,000 was too much for
them and they didn’t entertain the idea of spending more at all.
3. In the video, what should they have done differently?
a. I’m not sure there was anything I saw that they should have done different;y.
They stood their ground and didn’t get pressured into buying something they
couldn’t afford.
4. Who was your role-play partner? Include their first and last name. (If you had two
partners, include the name of both partners.)
a. Caleb Payne
5. How long did your role-play last? (Round to the nearest minute.)
a. 30 minutes or so
6. Explain the insights you gained when you played the role of the buyer.
a. There are a lot of questions I should be asking and thinking about as I look at
cars.
7. Explain the insights you gained when you played the role of salesperson.
a. It’s easy to oversell something especially when the buyer isn’t exactly sure about
what they’re wanting.
8. Write a definition for lowballing in your own words.
a. I think loballing means to ask or pitch below the lower fair market pricing.
9. Write a definition for buyer's remorse in your own words.
a. Regretting a purchase after buying it.
10. Evaluate your decision on whether or not you decided to buy the car when you acted as
the buyer.
a. I decided not to buy the car because I knew it wasn’t something I could afford
right now.