MANAGING BASIC ASSETS

(PART 2)

Making Automobile and

Housing Decisions

PERSONAL FINANCE
 Buying an Automobile
Choosing a Car • Hybrid, diesel or gas? What brand? What type?

Affordability • Amount of down payment, size of the monthly loan payment that you can afford.

• Operating Cost - the out-of-pocket which includes the registration, license, fuel, oil, tire, maintenance.

How much can you afford

to pay for a car?
 Buying an Automobile
Choosing a Car • Hybrid, diesel or gas? What brand? What type?

Affordability • Amount of down payment, size of the monthly loan payment that you can afford.

• Operating Cost - the out-of-pocket which includes the registration, license, fuel, oil, tire, maintenance.
• Depreciation – the loss in the value of an asset.
• Gas, Diesel, Hybrid:
• New, Use or Nearly New
• Size, Body Style and Features
• Other Considerations:
• Trading in or selling your existing car
• Fuel Economy
• Safety features

Purchase Transaction
• Negotiating the Price. Be careful with anchoring (a behavioral bias in which an individual tends to allow an initial estimate to
dominate the actual assessment.
• Closing the deal.
• Sales Contract – an agreement to purchase an automobile that states the offering price and all conditions of the offer; when
signed by the buyer and seller, the contract legally binds them
 Leasing a Car
Lease • An arrangement in which the lessee receives the use of a car in exchange of making monthly payments over a
specified period.

• Close-End Lease (walk-away lease) – at the end of its term, you will simply turn in the car.
• Open-End Lease (finance lease) – if the car is worth less than the estimated RESIDUAL VALUE, then you must pay the
difference.
• Residual Value – the remaining value of a leased car at the end of the lease term.

The Leasing Process (the size of the monthly lease payment is based on:)
• The capitalized cost of the car – the price of the car you are leasing.
• The forecast residual value of the car at the end of the lease.
• The money factor, or financing rate on the lease (similar to the interest rate on a loan).
• The lease term

Addendum:
Purchase Option – a price specified in a lease at which the lessee can buy the car at the end of the lease term.
Foreclosures - the process whereby the lenders attempt to recover loan balances from the borrowers who have quit making payments by forcing the sale of
the home pledged as collateral.
Leasing a Car Lease versus Purchase Analysis
Meeting Housing Needs: Rent or Buy?
Single-Family Homes

Condominiums

Cooperative Apartments

Rental Units
Real Estate: Buying with little or no money.
PAG-IBIG Housing Loan