🏡 UNIT 9 • 3 WEEKS

Major Life Purchases

Make smart decisions on cars, homes, and insurance

🚗 Buying a Car

A car is often the first major purchase. Smart decisions here can save thousands of dollars.

New vs. Used

New Cars:

  • Warranty protection
  • Latest features
  • Lose 20-30% value first year
  • Higher insurance costs

Used Cars (2-3 years old):

  • Let someone else pay depreciation
  • Lower insurance
  • Often still under warranty
  • Best value for money

Buy vs. Lease

Buying:

  • Own the car when paid off
  • No mileage limits
  • Can modify/customize
  • Better long-term value

Leasing:

  • Lower monthly payments
  • Always driving newer cars
  • Don't own anything
  • Mileage limits & fees

The 20/4/10 Rule

  • 20% Down Payment: Reduces loan amount and interest
  • 4-Year Loan Maximum: Avoid being underwater on loan
  • 10% of Gross Income: Total car expenses (payment, insurance, gas, maintenance)

🏠 Renting vs. Buying a Home

When Renting Makes Sense

  • You plan to move within 5 years
  • You don't have 20% down payment saved
  • Your income/job is uncertain
  • You don't want maintenance responsibilities
  • Housing market is overpriced in your area

When Buying Makes Sense

  • You plan to stay 5+ years
  • You have 20% down payment
  • Your income is stable
  • You can afford mortgage, taxes, insurance, maintenance
  • You want to build equity

Hidden Costs of Homeownership

Budget for: Property taxes, homeowners insurance, HOA fees, maintenance (1-3% of home value annually), utilities, repairs, lawn care, and closing costs (2-5% of purchase price).

🛡️ Insurance Essentials

Auto Insurance

Required Coverage:

  • Liability: Covers damage you cause to others
  • Collision: Covers damage to your car in accident
  • Comprehensive: Theft, weather, vandalism

Save Money: Higher deductibles, good student discounts, safe driver discounts, shop around annually

Renters/Homeowners Insurance

Renters Insurance ($15-30/month): Protects your belongings and provides liability coverage. Required by many landlords.

Homeowners Insurance: Required by mortgage lenders. Covers home structure, belongings, liability. Costs 0.5-1.5% of home value annually.

Health Insurance

Stay on parents' plan until 26 if possible. Through employer is usually cheapest. Understand deductibles, copays, and out-of-pocket maximums. Don't go without it—medical debt is the #1 cause of bankruptcy.

✅ Major Purchase Planning