Personal Finance CH 8

Legal Aid Society

One of a network of publicly supported community law offices that provides legal assistance to consumers who cannot afford their own attorney.

A food package with 32 ounces costing $1.76 would have a unit cost of what amount?

$1.76 ÷ 32 = 5.5 cents an ounce

What are major sources of consumer information?

Personal Contacts Business Organizations Media Sources Independent Testing Organizations Government agencies

The main advantages of leasing include

(1) only a small cash outflow may be required for the security deposit, whereas buying can require a large down payment; (2) monthly lease payments are usually lower than monthly financing payments; (3) the lease agreement provides detailed records for business purposes; and (4) you are usually able to obtain a more expensive vehicle, more often.

To Minimize Consumer Problems Before Making a Purchase:

1. Obtain recommendations from friends, family members, and online reviews. 2. Verify company affiliations, certifications, licenses. 3. Understand terms of sale, return policies, and warranty provisions.

An item bought on credit with a $60 down payment, and monthly payments of $70 for 36 months, would have a total cost of what amount?

36 × $70 = $2,520 plus the $60 down payment for a total of $2,580

(LO 8-2) Implement a process for making consumer purchases

A buying process with several stages can be useful when planning purchases. A research-based approach to censured buying involves: 1. Pre-shopping activities- problem identification and information gathering. 2. Evaluating alternatives. 3. Determining purchase price. 4. Post-purchase activities- proper operations and maintenance

Small Claims Court

A court that settles legal differences involving amounts below a set limit and employs a process in which the litigants usually do not use a lawyer.

Describe some situations in which you might use the services of a lawyer.

Complicated legal matters. Writing a will Making a real estate purchase Suing for injury damages caused by a product.

When leasing, you arrange for the dealer to sell the vehicle through a financing company. As a result, be sure you know the true cost, including:

The capitalized cost, which is the price of the vehicle. The average car buyer pays about 92 percent of the list price for a vehicle; the average leasing arrangement has a capitalized cost of 96 percent of the list price. 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.

(LO8-4) Evaluate legal alternatives available to consumers.

The legal actions available to consumers include small claims court, class-action suits, the services of a lawyer, legal aid societies, and prepaid legal services. These legal means for handling consumer problems should be considered the a situation cannot be resolved through communication with the company or through the help of a consumer protection agency.

Arbitration

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

Rebate

a partial refund of the original price of the product

Implied Warranty of Merchantability

an implied promise that the goods being sold will be usable for the purpose for which they were sold

Implied Warranty

an unwritten guarantee that the good or service is fit for the purpose for which it was sold

Economic factors that affect your daily buying include ___, ___ rates, and ___ rates.

inflation interest tax

Class action suit

A legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice.

How does a service contract differ from a warranty?

A service contract is a paid agreement for repairs. A warranty is a feature offered by a manufacturer or distributor.

Better Business Bureau (BBB)

A system of nongovernmental, independent, local regulatory agencies supported by local businesses that helps settle problems between customers and specific business firms.

Limited Warranty

A warranty that excludes certain parts of the product form coverage or requires the customer to bear some of the expense for repairs resulting form defects.

Express Warranty

A written explanation of the producer's responsibilities in the event that a product is found to be defective or otherwise unsatisfactory. Two forms of an express warranty are Limited Warranty and Full Warranty.

Warranty

A written guarantee from the manufacturer or distributor that states the conditions under which the product can be returned, replaced, or repaired.

Full Warranty

A written promise that the company will repair or replace a defective product within a specified time period at no charge.

Federal Trade Commission (FTC)

An agency that regulates a variety of business practices and curbs false advertising, misleading pricing, and deceptive packaging and labeling.

In what situations can comparing prices help in purchasing decisions?

Comparing prices can be helpful when buying expensive or complex items, when competing brands are available, when different package sizes are available, and when product quality varies.

How are daily buying decisions relate to overall financial planning?

Daily buying decisions involve a trade off between current spending and saving for the future.

What are the common causes for consumer problems and complaints?

Defective products Low qualify or short product lives Unexpected costs Deceptive pricing Fraudulent business practices

What factors commonly influence a person's daily buying choices?

Economic, social, and personal factors affect daily buying habits. These facts influence your spending, saving and investing choices and when combined with wise buying activities can contribute to your long-term financial security.

What maintenance activities could increate the life of your vehicle?

Frequent oil changes, regular tune-ups, and checking belts, hoses, and fluids regularly can minimize major repairs and maximize vehicle life.

Implied Warranty of Title

Indicates the seller has the right to sell the product

(LO8-3) Determine steps to take to resolve consumer problems.

Knowing what actions to take when complaining about a consumer purchase ca effectively resolve a situation. This process should involve these steps: 1. Return to the place of purchase. 2. Contact the company's main office. 3. Obtain assistance from a consumer agency. 4. Take legal action.

When might leading a motor vehicle be appropriate?

Leasing may be appropriate for business use or when a new vehicle is desired every few years.

(LO 8-1) Identify strategies for effective consumer buying.

Many economic, social, and personal factors influence daily buying decisions. Overspending and poor money management are frequent causes of overuse of credit and other financial difficulties. Common strategies for effective purchasing are: Timing Purchases Comparing buying sources and brands Using label information Computing unit prices Evaluating Warranties

How does arbitration differ from mediation?

Mediation is not a legally binding process. Arbitration will result in a legally binding decision.

What types of brands are commonly available to consumers?

National brand store brand private-label products

Prepaid legal services

Provide unlimited or reduced-fee legal assistance for a set fee.

Unit Pricing

The use of a standard unit of measuring to compare the prices of packages that are different sizes.

True or false: The drawbacks of leasing an automobile include no ownership interest in the vehicle and costs for extra mileage, for certain repairs, and for turning the car in early.

True

What actions are appropriate when buying a used car?

Used Car Inspection: Outside the car Inside the car The engine Road Test Identify sources of used vehicles, research and compare prices, determine the condition of vehicle, and decide which options are desired.

In what types of situations would small claims court and class-action suits be helpful?

You can go to small claims court to avoid hiring a lawyer and or if the claim is below a certain amount. A class-action suit is used when a group of people have the same complaint. Only a few can start the claim represented by a lawyer and affected parties can opt in divide any awards if granted.

Cooperative

a nonprofit organization owned and operated by its members for the purpose of saving money on the purchase of goods and services

Product label on appliances includes information on operating ____,to assist you in selecting the most energy-efficient models.

costs

The factors that influence the price of a used car include:

features and options condition demand for the model number of miles

Open Dating

information about freshness or shelf life found on the package of a perishable product

Mediation

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

How can most consumer complaints be resolved?

By going to the original sales location.

Avoiding deceptive practices

1. Only do business with reputable companies with a consistent record of satisfying customers. 2. Avoid signing contracts and other documents you do not understand. 3. Be cautions about offerings that seem too good to be true - they probably are! 4. Compare the cost of buying on credit with the cost of paying cash; also compare the interest rate the seller offers with those offered by a bank or credit union. 5. Avoid rushing to get a good deal; successful con artists depend on impulse buying.

Service Contracts

An agreement between a business and a consumer to cover the repair costs of a product.

What rights do purchasers of products have even if no written warranty exists?

An implied warranty ("warranty of merchantability" or "warranty of fitness for a particular purpose") provides that products sold are suitable for sale and will work effectively whether there is a written warranty or not. Implied warranties are required by state law. To avoid them, the seller can state in writing that the product is sold as is. If you buy any product "as is," you have little legal recourse should it fail to perform, even if the salesperson made verbal promises to take care of any problems.

Impulse buying

An unplanned buying behavior resulting from a powerful urge to buy something immediately