Car Stuff Auto Insurance – Basic Types • Bodily injury liability: – Pays for injuries you cause to someone else. This is usually required. • Property damage liability: – Pays for damages to someone else’s car, mailbox, garage, or pool. This is also usually required. • Personal Injury Protection (PIP): – Pays for injuries to the driver and passengers of your car. This is required in some states. Auto Insurance – Basic Types (continued) • Collision: – Pays for your car when you get in a wreck. • Comprehensive: – Pays for damage to your car for theft, earthquake, or other things not wreck-related. • Uninsured motorist: – Pays for your injuries when you get into an accident with an uninsured motorist. That “20/40/10” thing • First number (20): Up to $20,000 of coverage for “bodily injury liability” (someone else’s injury) per person injured in an accident. • Second number (40): Up to $40,000 coverage for “bodily injury liability” per accident. • Third number (10): Up to $10,000 coverage fro all property damage per accident. No-fault Some states have something called “no-fault” laws. This means that your insurance carrier covers your bodily injury and property damage no matter who caused the accident. Buying vs. Leasing a Car If you want a new car every three years, a lease might be best for you. A lease is simple with minimal unknown costs. If you want to keep a car for a while, buying will save you money in the long run. VS. You must master the jargon • Residual value: Value of your car at the end of the lease • Capitalized cost: Selling price. • Money factor: Interest in a lease. • “Can’t go lower”: Lies. All lies. Lease pros and cons (+) Leases usually have lower monthly payments. When you lease you’re paying for the difference in value of the car now versus the value at the end of the lease. (+) Leases have no repair costs. Since your car is new, it will be under warranty over the life of the lease. If you own a car, your warranty will eventually end. Lease pros and cons (-) Leases have higher insurance premiums. Since you don’t own the car, the leasing company gets to call the shots when it comes to insurance. They usually require more than the minimum state standards. (-) Leases have restrictions. A lease charges you extra fees for driving too many miles. When you own you can drive as much as you want. Lease pros and cons (-) Lease payments never end. If you lease a car and then lease again, your payments never end. When you buy a car, you’ll eventually pay it off.