Deck 8: The Home and Automobile Decision

Question 1

For most cars, the manufacturer's warranty extends through the first seven years of ownership or the first 70,000 miles, whichever comes first.

Answer 1

False

Question 2

Open-end leases are leases in which you return the vehicle at the end of the lease and you have no further responsibilities.

Answer 2

False

Question 3

Leasing a car may make sense if you drive over 25,000 miles a year.

Answer 3

False

Question 4

The monthly payments on a 36-month lease on a car will often be smaller than the monthly payments on a 36-month loan to purchase the car.

Question 5

Name the steps in smart buying.

Question 6

Automobile leasing is actually just a long-term rental agreement with the lessor.

Question 7

Carrying credit cards can increase impulse purchasing.

Question 8

Stretching a car loan from 48 months to 60 months means the car will end up costing you more when you have paid in full.

Question 9

The first step at the car dealership is to negotiate the best price that you can on the car that you need.

Question 10

Smart buying means buying what you want first and figuring out how you'll pay for it later.

Question 11

When making a smart purchase you don't need to consider such charges as delivery fees, installation fees or service costs as these are already included in the purchase price.

Question 12

How can you benefit from following the smart buying steps?

A) Smart buying allows a higher standard of living because you make smarter purchases.
B) Smart buying allows you to buy what you want when you want it.
C) Smart buying helps you maintain your budget.
D) Both A and C are correct.

Question 13

Evaluating whether you need or simply want a sun roof is an example of using the smart buying steps.

Question 14

A 48-month lease on a car with a 36-month manufacturer's warranty is a gamble.

Question 15

Suppose that you are at the end of your automobile lease. The leasing company has just informed you that the car's market value is greater than its residual value and they will be sending you a refund. What type of lease did you have?

A) closed-end lease
B) open-end lease
C) walk-away lease
D) residual lease
E) none of the above

Question 16

Stretching a car loan from 48 months to 60 months means the car will end up resulting in a smaller monthly payment.

Question 17

Smart buying means enjoying the highest standard of living that you can based on your income and budget.

Question 18

How does Smart buying improve your standard of living?

Question 19

Give at least six tips on smart buying.

Question 20

An automobile warranty provides coverage for the basic parts against manufacturer's defects for a set period of time or miles.

Question 21

What are the basic financing options when considering a new vehicle?

Question 22

Congratulations! You have just agreed on the final price for your new car and now you have to finance the purchase. The negotiated price of the new car is $18,500 and you will receive $5,500 for your trade-in. What will your monthly payment be on a 48-month loan with a 7% APR?

A) $281.25
B) $311.30
C) $385.42
D) $443.01

Question 23

Billy has chosen to purchase a new vehicle. The vehicle costs $15,000. His APR is 10% and he will be financing the vehicle for 36 months. How much will Billy pay each month for his new vehicle?

A) $484.01
B) $296.35
C) $312.66
D) $405.29
E) $496.33

Question 24

Suppose that you were thinking about leasing a new vehicle. Which of the following should not be an important consideration?

A) I drive less than 15,000 miles annually.
B) I like to get a new car every few years.
C) I dislike the hassle of trading-in or selling cars.
D) It's the only way I can afford the vehicle that I want.
E) I dislike the hassle of maintenance.

Question 25

List the factors that go into a monthly lease payment and tell how the dollar value of a lease is calculated.

Question 26

Write a paragraph giving at least five important tips on buying a new car.

Question 27

You have been having significant problems with your new car. Every time you turn around something is breaking or not working properly. Fortunately, the "lemon laws" are there to help. Which of the following is not one of the criteria for application of the lemon laws?

A) You have made at least four attempts to solve the problem.
B) Your car has been out of service for at least 30 days during the first year after purchase.
C) You have under 12,000 miles on the car.
D) You must return the vehicle to the original dealership.

Question 28

Candice is purchasing a new Jeep. She has the price negotiated down to what she thought was the lowest possible price until she heard that her Jeep has a holdback amount of 3%. Is it fair for Candice to ask the dealership to take the holdback amount off her final sales price?

A) Absolutely, this would decrease the mark up price of the Jeep and save Candice additional dollars.
B) No. The dealership would most likely lose money on the sale.

Question 29

List the four steps in the automobile decision.

Question 30

If you are considering purchasing a used car you should

A) do some research so you'll know a fair price for the vehicle you're looking for.
B) ask questions about the mechanical history of the car, including whether it has been in any accidents.
C) have the car inspected by a mechanic before you purchase it.
D) all of the above

Question 31

Rob Roy is toying with the idea of buying a used car every three years instead of leasing or buying a new one. Assuming he can find a one-owner with low miles in good condition, what advantages might he enjoy?

Question 32

You disagree with Ed "Shifty" Smith, a car salesperson, on the price of an open-end lease. He says the depreciation charge is only $6,000. What is the actual depreciation charge for a car now worth $23,000 that is expected to drop in value to $15,000 in two years?

A) $7,000
B) $7,500
C) $8,000
D) $11,500
E) $15,500

Question 33

Describe the keys to obtaining a "good" lease.

Question 34

Which of the following factors plays a role in determining the monthly lease payment of a car?

A) the agreed-upon price of the vehicle
B) the length of the lease
C) the capitalized cost based on your trade-in
D) the value of the vehicle at the end of the lease
E) All of the above.

Question 35

In auto sales, a ________ is an amount of money, generally in the 2% to 3% range, that the manufacturer gives the dealer for selling an automobile.

A) holdback
B) rebate
C) kickback
D) markup
E) none of the above

Question 36

What kind of valuable information can you find online at websites such as Edmunds.com or Autosite.com concerning smart buying for automobiles?

A) The dealer cost and dealer holdback for the automobile you are interested in.
B) The trade-in value on your current automobile.
C) The final price you will pay for the automobile at the dealership.
D) Only A and B are correct.
E) All of the above are correct.

Question 37

Bridgette Rojeau has found a beautiful late model used car on a dealer's lot. It is just what she has always wanted. Give her seven tips on buying this dream car.

Question 38

Over the past decade, the number of new car sales are down and the number of new car leases are up. What is probably the main reason why this is true?

A) The salesman makes a higher commission when cars are leased.
B) The manufacturers prefer it when people lease instead of purchase..
C) New cars are getting so expensive that the average person can't afford to buy them.
D) Both A and B are correct.

Question 39

Abraham is buying a new truck. The sale price for the truck is $23,410. His bank is loaning him the money at an APR of 6.5 for 5 years. How much will Abraham's monthly truck payment be?

A) $229.36
B) $375.88
C) $307.65
D) $402.35
E) $458.04

Question 40

Another name for a closed-end lease is a(n)

A) take-out lease.
B) walk-away lease.
C) end-purchase lease.
D) terminal lease.
E) none of the above

Question 41

If you have just been transferred to a new city and plan to live in your new location for many years, buying a house is generally a better option than leasing for the first year.

Question 42

From a financial perspective, the decision of whether to rent or buy is tied to how long to plan to live in the home.

Question 43

A co-op would be a wise choice for a consumer who wishes to pay no property taxes.

Question 44

An assessment is a voluntary contribution by the condominium owners.

Question 45

Leasing a car may make sense for some people but there are disadvantages to leasing. What are the disadvantages to leasing a car verses purchasing the car outright?

Question 46

A condominium is a good choice of housing for someone seeking an affordable, low-maintenance situation with some shared amenities.

Question 47

Why is it that you should not tell the salesperson what you want your monthly payment to be before you negotiate the final price on the car?

Question 48

The Internet can help you research neighborhoods and find a community in which you'd like to live.

Question 49

Buying a home generally isn't desirable if you don't intend to stay in it for more than two or three years.

Question 50

The typical down payment is 20% for traditional mortgage loans.

Question 51

The common areas in a condominium complex may include swimming pools, parking lots, and grounds.

Question 52

For many consumers, a good school district is an important consideration when purchasing a home.

Question 53

If the roof of your condominium building needs expensive repairs, then the condominium board will pay for repairs at no expense to you.

Question 54

A co-op is an apartment building owned by a corporation where residents of the building are stock holders. When you buy into a co-op, you buy shares that reflect the dollar value of your space. The larger and more desirable the space you want requires purchase of more shares.

Question 55

One of the main barriers to home ownership is the down payment.

Question 56

Because a co-op is technically not a "home" it does not charge a homeowner's fee.

Question 57

Whether or not you itemize your tax deductions, you reap tax benefits due to the tax deductibility of the interest payments on your mortgage.

Question 58

If you are the type of person who wants complete control over the style and decoration of your home, then a condominium or cooperative would be an appropriate housing decision for you.

Question 59

The difference between a co-op and a PUD is that

A) with a co-op you do not own the land on which your units sits individually and with a PUD you do own the land on which your unit sits.
B) with a PUD you do not own the land on which your unit sits individually and with a co-op you do own the land on which your unit sits.

Question 60

Young, single people often live in rental housing, since they may not yet have the funds to purchase a home.

Question 61

It's advisable to always take the biggest loan that a lender will give you.

Question 62

As a general rule, your PITI shouldn't exceed 28% of your pretax monthly income.

Question 63

An appraisal is a typical but not required part of the mortgage approval process.

Question 64

If you are not yet committed to living in a particular geographic region, rental housing is a good option for you.

Question 65

In many states rental deposits are to be kept in a bank account separate from the landlord's general funds.

Question 66

A loan origination fee is a fee paid to the lender, generally in the $200 to $300 range, and covers some of their costs of processing and financing the mortgage.

Question 67

You, not your lender, should determine the amount you want to borrow for a mortgage.

Question 68

PITI is a one-time, initial cost of home ownership.

Question 69

The majority of people never live in rental housing.

Question 70

Being able to move with minimum inconvenience is an appealing aspect of buying a home.

Question 71

Special assessments are fees that can be charged to cooperative shareholders and condominium owners to cover large maintenance and repair items.

Question 72

Tenants are guaranteed to get their full deposit back no matter the condition of the unit upon moving out.

Question 73

A down payment is the initial buyer's equity in the asset being purchased.

Question 74

Mortgage bankers originate mortgage loans, sell them to banks, pension funds, and insurance companies, and service or collect all the monthly mortgage payments.

Question 75

Home owners have complete autonomy to remodel their dwelling to suit their own needs and tastes.

Question 76

The largest cost associated with renting a home is the rent itself.

Question 77

An appraisal is an estimate of what your home and property are worth.

Question 78

A mortgage with a 20% downpayment will have a higher APR than one with less than 20% down.

Question 79

A mortgage for less than 80% of the appraised value of the home will not require PMI insurance because they default less often.

Question 80

A title search fee is paid to an attorney or title company for searching ownership records to make sure the person selling you the property really owns it.