Personal Finance: Chapter 6- Consumer Purchasing Strategies

What should you do when buying a used car? What might reduce the life of your car?

Check out the used car -Outside of the car -Inside the car -The engine -the road test

Comparing yearly (single) payment to future value (present value) of savings

-lowest interest rate or the lowest payment does not necessarily mean the best credit plan -loan length

Class action suits / When might this be helpful?

A legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice -auto-owners who were sold unneeded replacement parts for their vehicles

Compare buying/leasing car

Buying: Advantages- 1. cost about $10,000 less 2. Dealers offer lower payments Disadvantage- 1. Used cars can be deceptive Leasing: Advantages- 1. Only a small cash outflow may be required for the security deposit 2. Monthly lease payments are usually lower than monthly financing payments 3. the lease agreement provides detailed records for business purposes 4. able to obtain a more expensive vehicle Disadvantages- 1. No ownership of vechile 2. must meet requirements to qualify for credit 3. additional costs may occur

Calculating unit prices

Capitalized cost - about 92% of the list price for buying - about 96% of list price for lease

What tends to cause consumer problems/complaints? How are they typically resolved?

Causes: -Defective products -low quality -short product lives -unexpected costs -deceptive pricing -poor repairs

Variable versus fixed costs of operation

Fixed Costs- 1. Depreciation 2. Interest on auto loan 3. Insurance 4. License, registration, taxes and fees Variable Costs- 1. Gasoline and oil 2. Tires 3. Maintenance and repairs 4. Parking and tolls

Difference between arbitration and mediation

Mediation- The attempt by an impartial third party to resolve a difference between two parties through discussion and negotiation Arbitration- The settlement of a difference by a third party who decision is legally binding

What is the difference between a service contract and warranty? What kinds of warranties are there?

Warranty: a written guarantee from manufacturer of a product that specifies the conditions under which the product can be returned, replaced, or repaired. 1.Express warranty -Full warranty -limited warranty 2.Used- Car Warranty 3. New-Car Warranty Service Contract: agreement between a business and a consumer to cover the repair costs of a product

Comparing credit payments to paying in full

auto loans are available from banks, credit unions, consumer finance companies, and other financial institutions

Operating cost per mile

mulitiply the miles by the rate or divide monthly gross income by mileage