Chapter 6: Consumer Purchasing Strategies and Wise Buying of Motor Vehicles

Advantages of Leasing

Small cash outflow, lower monthly payments, provides detailed records, able to obtain a more expensive car

Financing resources

Banks, credit unions, other financial institutions, finance companies, or dealer financing

Fixed costs

Depreciation, interest on loan, insurance, license, registration, and taxes

Types of Warranties

Express, extended, implied; used car, new car, service contracts

Sticker price

MSRP

Payment schedule

Monthly payment amount; number of payments

Disadvantages of Leasing

No ownership interest, must meet requirements, may have additional costs

Buying a motor vehicle: pre-shopping activities

Problem identification, info gathering

Practical Purchasing Strategies

Timing purchases, purchase location, brand comparison, label information

Price comparison

Unit pricing, coupons/rebates; more store convenience = higher prices; ready-to-use products = higher prices, "sale" price not always savings

Warranties

Written guarantee from manufacturer/distributor specifying conditions under which the product can be returned, replaced, or repaired

Comparison shopping and Price analysis

can be beneficial

Invoice price

dealer's cost

residual schedule

expected value of the vehicle at the end of the lease

Variable costs

gas and oil, tires, maintenance and repairs, parking and tolls

Money factor

interest rate

Sales techniques to avoid

lowballing, highballing, "how much can you afford a month?", never leave deposit unless ready to buy, sales agreements with preprinted amounts, "your price is only $100 above our cost"

Buying a motor vehicle: purchasing alternatives

now or later?; cash or credit?; which brands?; which stores?; rent vs buy?

Capitalized cost

price of the vehicle

Buying a motor vehicle: evaluating alternatives

purchase alternatives, selecting vehicle options, comparing used vehicles, leasing a motor vehicle

Personal Consumer Protection

Do business only with reputable companies; avoid signing contracts you do not understand; if it seems too good to be true, it probably is; compare the cost of using credit vs. cash; avoid rushing to a good deal (impulse buying)