Home and Automobile

Decision

Abhinav Rajverma
 Learning Objectives

1. Make good buying decisions.

2. Choose a vehicle that suits your needs and budget.
3. Choose housing that meets your needs.
4. Decide whether to rent or buy a house.
5. Calculate the costs of buying a house.
6. Get the most out of your mortgage.

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 Introduction
 Buying a house is the single biggest investment most people make.
 Buying a car is another major purchasing decision.
 The vehicle must fit lifestyle and wallet.
 Vehicle and mortgage loans have impact on personal finances.
Smart Buying
Step 1: Differentiate Want from Need
Step 2: Do Your Homework
Step 3: Make Your Purchase
Step 4: Maintain Your Purchase

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 Checklist
Before You Buy
 Exactly know – what you want and what you can afford
 Do your homework
 Never buy on impulse
 Know seller’s refund, return, cancellation policies
 No business over telephone with unknowns
 Never rely on a salesperson’s verbal promises
Making a Complaint
A written letter or an email
Be brief and to the point
State clearly what you want done – be reasonable
Don’t write an angry, sarcastic, or threatening letter
Keep records
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 Smart Buying: A Vehicle (1/2)
Choices to Consider
New vs used vehicle
Buying vs Leasing
Differentiate Want from Need
Features and qualities wanted
Features and qualities needed
Do Your Homework
How much you can afford – Down payment, monthly payment
Which vehicle is right for you?
Other costs – insurance, warranty, etc.
Make Your Purchase
Get a fair price
Get details of other costs
Negotiate

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 Smart Buying: A Vehicle (2/2)
Financing Alternatives
Cash – cheapest
Investigate all financing options before buying
Keep financing out of the negotiations
The shorter the term – the higher the monthly payments
Buying and Leasing
Finance Lease
Operating Lease
Open-end lease – lessee to guarantee a residual value (GRV)
Close-end lease – option of either returning the car at the end
of the lease or buying it back from the lessor
Maintain Your Purchase

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 Leasing
A lease is an agreement between the lessor and the lessee whereby
the lessee has the right to use an asset in return for a payment or
series of payments for an agreed time-period.

Finance Lease
 All risks and rewards are transferred to the owner of assets.
 The title may or may not eventually be transferred.
 Lessee enjoys depreciation and interest-tax shield benefits.

Operating Lease
 Lease payment termed as operating expense.
 The tax advantage – the lease rental is part of the salary package.
 Purchase option – at the prevailing market value at the end of the
lease tenure.

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 Smart Buying: A House
Housing Options
Houses/Apartments/Others
Buying vs Renting
Differentiate Want from Need
Know what you want before you look.
Affordability, location, neighborhood, conveniences, schools
Do Your Homework
Investigate the potential home and all that goes along with it?
How much you can afford to pay?
One-time costs – Down payment and other costs
Recurring costs (EMI)
Maintenance and operating costs
Make Your Purchase
Get a fair price
Traditional real estate agent, buyer-broker
Negotiate
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 Renting vs Buying
 Decision based on lifestyle.
 Renting advantages
Financial and lifestyle flexibility
 Compare costs for each alternative.
 Buying advantages
Longer stay and appreciation, itemized taxes, forced savings

Time and Money:

Home Investment Dilemma

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 Financing the Purchase
Sources of Mortgages
Commercial Banks, Credit Unions, etc.

Interest Rate on Home Loans

1. Fixed-Rate Mortgage Loan
2. Floating-Rate Mortgage Loan
Rate changes on a quarterly basis as per market interest rates
3. Adjustable-Rate Mortgage (ARM) Loan
Interest rate is fixed for an initial period of loan
Variable interest rate after the initial period

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 Home Equity Loan
Home Equity Loan is a type of debt offered against the home equity.
 A second mortgage or home-equity installment loan.
 It can be availed for any purpose and is available against both
residential and non-residential property.
 The loan amount is calculated based on the current market value of
the property
 Home Equity = Current value of the house – total liabilities
payable towards the house
Home Equity Loan: Types
 Fixed-Rate Loan
 Home Equity Line of Credit (HELOC)
 It is a variable-rate loan
 A revolving credit facility allowing to reborrow like credit card

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 Summary
 Separate needs from wants, compare products, negotiate, maintain
product, and resolve complaints.
 Lease or buy a vehicle that fits your personal and financial needs.
 Choose housing that meets your needs.
 Rent or buy a house that fits your personal and financial needs.
 For buying a house, select an appropriate financing option
 Maintain your purchase.
 Get the most out of your mortgage.

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Thank You
for
Your Time

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