Bus Chap 8

Wise Online Buying Activities

1. Conduct Online Research 2. Compare Stores 3. Make Purchase 4. Plan For Future Purchases

Timing of Purchases

Be aware if the price varies with the time of the year

Resolving consumer credit

Step 1: Initial communication (return to place of purchase) Step 2: Communication with the company (email or call) Step 3: Consumer agency assistance (better business bureau, mediation, arbitration) Step 4: Legal action

Brand Comparison

Store-brand and private-label products, sold by one chain of stores, are low-cost alternatives to famous-name products

Mediation

The attempt by an impartial third party to resolve a difference between 2 parties through discussion and negotiation

Highballing

When offered a very high amount for a trade-in vehicle, with the extra amount made up by increasing the new-car price

Label Information

- Certain label information is helpful; however, other information is nothing more than advertising. - Federal law requires that food labels contain the company name and address, ingredients, nutrients & food allergy warnings. - Product labeling for appliances includes information about operating costs, to assist you in selecting the most energy-efficient models. - Open dating

Purchase Location

- Choice of retailer depends on location, price, product selection, and services available - Retail competition and technology have resulted in greater emphasis on superstores, specialty shops, and online buying- consumers have greater choice, potentially lower prices, and the need to carefully consider buying alternatives - Cooperatives

Service Contracts

- an agreement between a business and a consumer to cover the repair costs of a product - called extended warranties, but they are not warranties - for a fee, these agreements protect the buyer from high servicing costs resulting from certain repairs and other losses

Phase 2: Evaluating alternatives

- delay purchase/do without item; cash or credit; brands; compare price, quality, and service; rent or buy - Comparison shopping - Selecting vehicle options (mechanical devices, convenience and aesthetic options) - Comparing used vehicles (CarMax superstore) - leasing a motor vehicle

Variable operating costs of vehicle

- gasoline and oil - tires - maintenance and repairs - parking and tolls

Drawbacks of Leasing

- no ownership interest in the vehicle - a need to meet requirements similar to qualifying for credit - possible additional costs incurred for extra mileage, certain repairs, turning the car in early, or even a move to another state

Advantages of Leasing

- only a small cash outflow may be required for the security deposit whereas buying can require a large down payment - monthly lease payments are usually lower than monthly financing payments - the lease agreement provides detailed records for business purposes - you are usually able to obtain a more expensive vehicle

New-Car Warranties

- provide buyers with an assurance of quality - Vary in the time, mileage, and parts they cover - The main conditions of a new-car warranty are coverage of basic parts against defects; power train coverage for the engine, transmission, and drive train; and the corrosion warranty

True cost of vehicles

- the capitalized cost, which is the price of the vehicle - the money factor, which is the interest rate being paid on the capitalized cost - the monthly payment and number of payments - the residual value, which is the expected value of the vehicle at the end of the lease

Phase 3: Determining purchase price

- used-car price negotiations - price bargaining for new cars - comparing financing alternatives

Express Warranty

- usually in written form - created by the seller or manufacturer and has two forms: the full warranty and the limited warranty

Consumer Buying Activities

Involving daily consumer purchases and major household expenditures

Arbitration

The settlement of a difference by a third party whose decision is legally binding

Lowballing

When quoted a very low price that increases when add-on costs are included at the last moment

Cooperative

a nonprofit organization whose member-owners may save money on certain products or services

Rebate

a partial refund of the price of a product

Warranty

a written guarantee from the manufacturer or distributor of a product that specifies the conditions under which the product can be returned, replaced, or repaired

Implied Warranty

covers a product's intended use or other basic understandings that are not in writing

Limited Warranty

covers only certain aspects of the product, such as parts, or requires the buyer to incur part of the costs for shipping or repairs

Open dating

describes the freshness or shelf life of a perishable product

Implied Warranty of Merchantability

guarantees that the product is fit for the ordinary uses for which it is intended

Implied Warranty of Title

indicates that the seller has the right to sell the product

Full Warranty

states that a defective product can be fixed or replaced during a reasonable amount of time

Wise Purchasing Strategies

- Comparison shopping is considering alternative stores, brands, and prices - Avoid impulse buying, which can result in financial problems

Financial Implications of Consumer Decisions

- Daily buying decisions involve a trade-off between current spending and saving for the future - Economic, social, and personal factors influence your spending, saving, and investing choices

Price bargaining for new cars

- Set-price dealers use a no-haggling car-selling strategy, with prices presented to be accepted or rejected as stated - car-buying services help buyers obtain a specific vehicle at a reasonable price

Used-car price negotiation

- current price information in newspaper ads, Kelley Blue Book, or Edmund's Used Car Prices - factors that influence the basic price of a used car: the number of miles the car has been driven, the car's features and options, the condition of the vehicle, and the demand

Fixed ownership costs of vehicle

- depreciation - interest on auto loan - insurance - license, registration, taxes, and fees

Steps for purchasing a motor vehicle

Phase 1: Preshopping activities Phase 2: Evaluating alternatives Phase 3: Determining purchase price Phase 4: Postpurchase activities

Buying Influences

- Economic Factors: inflation, interest rates, tax rates, government regulations, product safety - Social Factors: lifestyle, interests, hobbies, peer group, culture, advertising, media - Personal Factors: Gender, age, occupation, income, education, marital status, family size

Phase 4: postpurchase activities

- Lemon Laws - Automobile operation costs: Fixed Ownership Costs (depreciation is largest) and Variable Operating Costs - Motor Vehicle Maintenance Regular care minimizes major repairs - Automobile servicing sources: Car dealers, auto repair shops, mass merchandise retailers, specialty shops

Phase 1: Preshopping activities

- Problem identification - Information gathering: Personal contacts,Business organizations, Media sources (television, websites), Independent testing organizations, (Consumer Reports), Government agencies, Online Sources (Autotrader)

Used-Car Warranties

- The FTC requires businesses that sell used cars to place a buyer's guide sticker in the windows of cards for sale- this disclosure must state whether the car comes with a warranty and what protection the dealer will provide - if no warranty is offered, the car is sold "as is" and the dealer assumes no responsibility for any repairs, regardless of any oral claims

The Use of Wise Purchasing Strategies

- Timing of purchases - Purchase location - Brand comparison - Label, package information - Price comparison - Warranties

Price Comparison

- Unit pricing uses a standard unit of measurement to compare prices of packages of different sizes - Coupons and rebates provide better pricing for wise consumers - When comparing prices, remember that: Convenience and ready-to-use products may mean higher prices; large packages are usually the best buy; "Sale" prices may not always mean saving money

Comparing financing alternatives

- Variety of lenders and some lenders may pre-approve you for a certain loan amount - Avoid being upside-down or having negative equity in your car - Look for rebates or low-interest financing - Consider the APR (true cost of credit)

Leasing

- a contractual agreement with monthly payments for the use of an automobile over a set time period, typically three, four, or five years