National Endowment for Financial Education
Financial Workshop Kit
Script
Use limitations: These materials may be used only for nonprofit, noncommercial educational purposes. These materials may not be used in connection with any sale, advertisement, endorsement, or promotion of any service, product, person, or business and may not be sold or offered for sale.
Put Yourself in the Driver’s Seat: Researching Car Costs
Teacher’s Guide
Target Audience
Lower-income and middle-income Americans who live in places where public transportation is lacking rely on personal vehicles to get to work and school, visit family, and enjoy entertainment options. In this situation, affordable and reliable cars help ensure long-term financial stability. Purchasing and owning a car, however, can be confusing and expensive. By arming themselves with information, consumers can find cars that meet their family, transportation, and financial needs.
Audience Profile
The audience for this workshop will likely be low-income to middle-income Americans who may have had a bad car-buying experience in the past. Whether they bought a sports car unsuited for driving in snowy road conditions, ended up with a lemon sold to them by a brother-in-law (to whom they are no longer speaking), or simply paid too much for a brand new car because it was beautiful, it’s likely they did not do enough (or any) research prior to making the purchase.
One reason car buying is stressful is due to the surprises it can bring. Registration, insurance, new tires, and gas expenses are often higher than expected. Cars that break down create hassles, cost money, and waste time. In addition, people who sell cars have a reputation for being less than honest. According to Al Lewis in The Wall Street Journal, “People who sell cars are considered the least-honest, least-ethical professionals, according to a Gallup poll.” Lewis believes this reputation is undeserved: “Car sales people do not deserve our deepest mistrust. They only want to sell cars. They might try to sell you an overpriced car. They might try to stick you with a shoddy car. But once you know their game, they become very transparent.”[1] As he notes, the key is to “know their game,” and consumers can do that through research.
Workshop participants may not have perfect credit or much spare time, which can add pressure to the car-buying experience. Fortunately, your audience has demonstrated a commitment to researching cars and their costs by signing up for this workshop. Once armed with research, participants will no longer be at the mercy of car sellers, whether at an independent car lot, a national dealership, a car broker, or an independent seller.
Workshop Overview
The individuals attending this workshop have already taken a huge step towards financial success by signing up for your class before making their next car or truck purchase. With your help, they will learn how to create car-buying plans that will give them the confidence to make sound financial decisions. Without such guidance, participants could risk being taken advantage of by car sellers.
The goal of this workshop is to guide participants through each step of the car-buying process— researching vehicles, determining financing, searching for available vehicles, and completing the buying process—to help them identify a car that meets their needs, wants, and budget.
This 90-minute workshop is designed to provide participants with tools to make informed financial decisions during the car-buying process.
Facilitator’s Preparation
► Review this script and the accompanying PowerPoint presentation and activities.
► Review the suggested length for each topic noted as (5) or (10) minutes and so on. This workshop is designed to be approximately 90 minutes from Welcome to Summary.
► Consider your own history with cars.
Have you ever made a car- or truck-buying decision that you regret? For example, did you find out after buying the car that its tires were costly to replace, that it was prone to breakdowns, was a gas-guzzler, or would cost a lot to insure?
Did you ever tie up money in a car loan to find that you needed that money for basic living expenses? For example, did you end up having to use your credit card for groceries because you were paying the loan on an expensive car?
Have you ever faced serious financial hardship, but hesitated to ask for help because, as a responsible adult, it seemed like something you should have known how to avoid?
Remember the feelings of pressure and fear that can arise when buying a car. If you’ve never had a bad experience buying a car, ask around. You no doubt have friends and family members who paid too much, bought a lemon (an unreliable car), or realized they bought the wrong car for the weather conditions in which they have to drive.
► Consider your own relationship with your car or truck.
Do you base a portion of your identity on the type of vehicle you drive?
Was the vehicle you purchased based purely on a financial decision, or did it include an emotional component as well?
Were you satisfied with the deal you negotiated on your last vehicle purchase?
► Understand that participants may be facing a variety of pressures and needs around the car-buying process.
They may have an occupation such as a job in landscaping or construction that requires a large truck.
They may have a large family and require a large vehicle.
They may have young children and need a vehicle that accommodates the car seats and booster seats required by law.
They may travel long distances and need a vehicle that, once it attains high mileage, remains reliable.
They may have plans to give the car or truck to a relative or leave the vehicle in a foreign country.
► Search online for keywords such as “car buying guide” and “cost of car ownership,” to access the wealth of resources about researching cars available on the Internet. Also refer to the list of resources that are part of this workshop kit.
► Research the “lemon laws” in your state ( > Buying & Selling > Lemon Law).
► Remember that, when working with adult learners, sharing personal stories and asking questions will make the workshop more engaging.
Materials Needed
► Flip chart and easel or marker board
► Markers
► Pencils/pens and paper for participants to take notes
► Enough copies of the following activitiess to pass out to participants during the workshop:
Car Options Checklist activity
Four-Step Spending Plan activity
Needs vs. Wants activity
Spending Leaks activity
Calculating Car Costs activity
How to Facilitate This Workshop
Put Yourself in the Driver’s Seat: Researching Car Costs (Slide 1)
► (Display this slide while participants are filling the room.)
Welcome & Introductions (Slide 2)
(5)
► Introduce yourself and express your pleasure in helping participants make educated car-buying decisions.
?Ask: Ask participants to introduce themselves and explain—quickly—why they are here.
► Write some of those reasons on the flip chart or marker board. Reasons may include: Buying a first car, needing to replace a broken or wrecked car, having purchased a lemon in the past, feeling like they were cheated on their last car purchase, or simply wanting to get a good deal on a car.
Getting Ready to Hit the Road (Slides 3–4)
(5)
► Note that learning what decisions result in buying an affordable, reliable car can save participants thousands of dollars in the long run.
► Explain that taking time to first research cars and their costs will help participants find a car that provides everything they need—plus enough of what they want—that they’ll end up loving their new vehicle.
► Emphasize that everyone’s transportation needs and financial situations are different. Participants need to do their own research in order to:
Stay in control of the deal.
Know what they can afford.
Understand the true cost of ownership—way beyond the amount of the monthly payment.
Save money by making thoughtful buying decisions.
Love their vehicle.
Objectives (Slide 5)
(5)
► Share the workshop objectives:
Learn to research the kind of car you need, want, and can afford to buy—and own (i.e., maintain and repair on a regular basis).
Figure out how to pay for a car.
Start searching for a car to buy.
Complete the car-buying process.
► Note that because everyone’s financial situation and transportation needs are different, you will not be providing advice on what make or model of car to buy (or how to buy it), but rather steps in the car-buying process that lead to informed and wise car-buying decisions.
► ?Ask: Has anyone ever bought a car on impulse? For example, did you ever see a beautiful car at a dealership, walk in, test drive it, and then drive it off the lot? If so, did you get a good deal on that car, and did the car end up meeting your needs?
The Car-Buying Process (Slides 6–7)
(5)
► Review the typical steps involved in buying a car.
- Get a rough idea of the kind of car you want and need.
- Perform initial research to find out if you can afford it.
- Do serious research, considering initial and ongoing costs.
- Figure out how to pay for the car.
- Start looking at cars.
- Check out the car you want to buy.
- Complete the buying process.
► Note that if the process seems somewhat cyclical, it is.
To start researching, participants must first have some idea of the kind of car they need and want.
If preliminary research shows that car to be affordable and reliable, they can move on to the next step in the car-buying process. Otherwise, participants will need to reconsider what car they can afford, how they will pay for it, or which car will best meet their needs in terms of reliability and upkeep.
► Emphasize that “Start looking at cars” does not occur until Step 5 for a reason. To get the best deal on a reliable car, participants need to first arm themselves with the information they’ll acquire in Steps 1–4.
► Note that it’s common to buy a used car from a friend or family member. To protect the relationship, participants should be careful to research the car and outline the deal in writing as they would with any other seller.
Deciding on the Type of Car (Slide 8)
(5)
► Pass out the Car Options Checklist activity and note how it is divided into needs and wants.
► Explain that participants should start the car-buying process by first identifying their needs:
Model—sedan, station wagon, SUV, van, truck.
Seating—number of passengers, room for car seats, room for cargo.
Climate—air conditioning, all-wheel drive, or four-wheel drive.
Performance—reliability, miles per gallon, towing capacity.
► Emphasize that once participants meet their needs, only then should they consider the options they want:
Convenience—power windows, keyless remote, rear-window defogger.
Assistive devices—GPS, parking assistance, anti-lock braking system (ABS).
Entertainment—Bluetooth, CD player, satellite radio, MP3 connection, DVD player.
Comfort—leather seats, heated seats.
Performance—speed, fuel economy.
Appearance—paint color, wheel style, window tinting.
Resale value.
► Note that participants generally can get more “wants” if they buy a used car.
► Explain that “need” is a relative term—some people’s needs are other people’s wants. For example, some drivers may want a keyless remote, whereas a parent who often carries a baby to and from the car may consider this a necessity.
► ?Ask: Ask participants to estimate the cost of the car they need. Write a few of their answers on the board.
Researching Average Costs (Slides 9–11)
(10)
► Tell participants that they can begin researching car costs once they know what kind of car they need. If they’re still unclear about those needs, knowing a price range in which to look might help. Financial advisors suggest these starting points for how much to spend on a car:
The price of the car itself should be no more than half of your annual income. So for an annual income of $24,000, look at cars priced below $12,000.
Another approach is to consider spending only 15 percent of monthly gross pay on transportation, including car payment, insurance, gas, and maintenance.
► Encourage participants to start researching the cost of the car by:
Browsing reliable car websites such as or www.fueleconomy.gov.
Flipping through newspaper ads, car guides, and car magazines.
► Pass out the following activities: Four-Step Spending Plan, Needs vs. Wants, Spending Leaks activity.
Participants can use Four-Step Spending Plan activity to figure out how much money they currently have available to spend on transportation. (Income – Expenses = Available Funds)
The Needs vs. Wants and Spending Leaks activities help participants increase awareness of how they spend money, and on what. With that awareness, participants may be able to “find” more money in their current budget to spend on a car.
► Explain that, after initial research, participants may need to revise their choice of car to fit their financial situation.
Performing Serious Research (Slide s 12–13)
(5)
► Explain that the cost of the car itself is just one consideration. Owning and driving a car involves many costs that participants need to plan for.
► Tell participants that at this point in the car-buying process they now can research all the costs of owning and driving the specific car they have chosen.
► Note that upfront costs include:
A down payment and first monthly payment.
Sales tax.
Registration and license plate fees.
► Tell participants to talk to an insurance agent about car insurance rates and coverage options:
Consider the type of coverage they’ll need.
Find out the monthly premium amount needed to insure their specific type of car, including all desired options.
Inquire about discounts and bundled rates, such as insuring two cars—or insuring a house and car—on the same policy.
► Describe the costs involved in driving and maintaining a car, emphasizing that a well-maintained car may last longer and have more resale value.
Weekly—gas, fluids (such as antifreeze and windshield wiper fluid), parking.
Quarterly—oil changes, fluids, routine maintenance checks.
Annual considerations—tire rotation, brake tune-up, windshield wiper replacement, and license plate renewal charges.
As needed—repairs and manufacturer-suggested upgrades based on mileage and the vehicle’s age (i.e., timing belt).
► Explain that participants will need to regularly set aside funds to pay for car expenses. A rule of thumb is to save at least $100 per month ($1,200 per year) for repairs and routine maintenance, such as tire rotation. Participants should adjust this figure based on their specific circumstances.
Example: A participant drives for a living, putting over 30,000 miles on his car each year. If his research shows that tires cost $200 each and last for only 30,000 miles, he would need to spend at least $800 each year for new tires. Assuming he saves $100 per month, only $400 would be left over for other car costs, such as brake tuneups and unexpected repairs.
Manufacturer and dealership warranties can save money on certain services, including some high-cost repairs, usually up to a specified amount of time or number of miles driven. Before committing to pay more for an extended warranty, participants may want to research the reliability and performance of the vehicle year and model to see if an extended warranty is necessary.
► Pass out the Calculating Car Costs activity and tell participants to fill it out later as they do their research. Suggest that they search online, using the keywords “cost of car ownership” to find many useful resources and calculators.
?Ask: Ask participants how they paid for their last car. Write a few of their answers on the board.
Paying for the Car (Slides 14–15)
(5)
► Explain that few people have the cash to pay for a car upfront, so most car purchases require financing.
► Note that participants need to balance a monthly loan amount they are willing to pay with the amount of interest they are willing to pay over the life of the loan. Making careful financing decisions is very important and must be based on research.
Financing involves paying interest.
Putting more money down and making higher monthly payments reduces the amount of interest paid over the life of the loan.