Chapter 6 personal finance
leasing
a contractual agreement with monthly payments for the use of an automobile over a set time period (a couple of years) *at the end of the lease term, vehicle is returned to the leasing company
class action suit
a legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice *represented by one or more lawyer
small claims court
a person may file a claim involving amounts below a set dollar limit *ranges from $500 to 10k *takes place without a lawyer most times
warranty
a written guarantee from the manufacturer or distributor that specifies the conditions under which the product can be returned, replaced, or repaired
final lease payment
after this payment, you can choose to return, keep, or sell the vehicle *if residual value<current market value, you can make a profit
service contract
an agreement between a business and a consumer to cover the repair costs of a product *sometimes called extended warranties but it isn't a warranty *cost a fee *can be used to insure the buyer against losses due to the cost of certain repairs and losses
car buying services
businesses that help buyers obtain a specific new car at a reasonable price EX: auto broker *They offer desired models with options for prices ranging between $50-200 over the dealers costs *when bought, auto broker arranges the purchase with a dealer near your home
CPO
certified pre-owned vehicles, these are nearly new cars that come with the original manufacturer's guarantee of quality *Higher price *originally created to generate demand for the many low-mileage vehicles returned at the end of a lease
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 (parts) or requires the buyer to incur part of the costs for shipping or repairs
invoice price
dealer's cost > the amount less than the sticker price
open dating
describes the freshness or shelf life of a perishable products
warranty of merchantability
guarantees that the product is fit for the ordinary uses for which it is intended (EX. a toaster must toast bread, MP3 player must play music)
warranty of title
indicates that the seller has the right to sell the product
mediation
involves the use of a third party to settle grievances *mediator tries to resolve a conflict between a customer *non binding process
impulse buying
involves unplanned purchasing, which can result in financial problems
express warranty
is created by the seller of manufacturer and has two forms: the full warranty and the limited warranty
legal aid society
one of a network of publicly supported community law offices that provide legal assistance to people who cannot afford their own attorney *come at a minimal cost or without charge
rebate
partial refund of the price of a product
unit price
price of item/ # of units of measurement
sticker price label
printed on the vehicle with the suggested retail price *presents the base price of the car with costs of added features
prepaid legal services
provide unlimited or reduced-fee legal assistance for a set fee *designed to prevent minor troubles from becoming complicated legal problems
lemon laws
require a refund for the vehicle after the owner has made repeated attempts to obtain servicing *these apply when four attempts are made to get the same problem fixed *also applied when the vehicle has been out of service for more than 30 days within 12 months of purchase or firs 12000 miles
driving costs
size of automobile + number of miles you drive = ?
full warranty
states that a defective product can be fixed or replaced during a reasonable amount of time
independent testing organizations
such as consumers Union in its monthly consumer reports, provide info about the quality of products and services
payment schedule
the amount paid monthly and the number of payments
residual value
the expected value of the vehicle at the end of the lease
money factor
the interest rate being paid on the capitalized cost
depreciation
the loss in the vehicle's value due to time and use
car servicing sources
1. car dealers- high charges 2. service stations and independent auto repair shops 3. mass merchandise retailers 4. speciality shops
wise online buying
1. conduct online research, pre shopping activities 2. compare stores, evaluating alternatives 3. make purchase, selection and purchase 4. plan for future purchases, post purchase activities
new car warranty
1. coverage of basic parts against defects 2. powertrain coverage for the engine, transmission, and drive train 3. corrosion warranty- applies to holds due to rust (not surface rust)
common complaints
1. debt collectors 2. imposter scams 3. identity theft 4. telephone and mobile services 5. banks and lending organizations 6. prizes, contests, and sweepstakes 7. online and catalog sales 8. home and auto repairs 9. work at home , starting your own business, phony training courses, employment scams 10. fraudulent diets and health claims, easy weight loss 11. phony charities 12. high return investments and multilevel marketing
fixed ownership costs
1. depreciation 2. interest on auto loan 3. insurance 4. license, registration, taxes and fees
personal consumer protection
1. do business only with reputable companies with a record of satisfying customers 2. avoid signing contracts and other documents you do not understand 3. be cautious about offerings that seem too good to be true 4. compare the cost of buying on credit with the cost of paying cash, compare the interest rates the seller offers with those offered by a bank or a credit union 5. avoid rushing to get a good deal; successful con artists depend on impulse buying
variable operating costs
1. gasoline and oil 2. tires 3. maintenance and repairs 4. parking and tolls
resolving consumer complaints
1. initial communication 2. communicate with the company 3. consumer agency assistance 4. legal action
car equipment
1. mechanical devices to improve performance- power steering, power brakes, and cruise control 2. convenience options - audio systems, power locks, rear window defoggers and tinted glass 3. aesthic features- metallic paint, special trim, upholstery
comparing prices
1. more store convenience = higher prices 2. ready to use products = higher prices 3. large packages are the best buy usually, but compare using unit pricing 4. sale does not always mean saving money 5. the use of online sources and shopping apps can save time
sources of used cars
1. new car dealers - higher prices 2. used car dealers- lower prices 3. individuals selling their own cars 4. auctions and dealers 5. used car superstores (EX. CarMax)
making a purchase
1. obtain recommendations from friends, family members and online reviews 2. verify company affiliations, certifications and license 3. understand the sale terms, return policies and warranty provisions
leasing advantages
1. only a small cash outflow may be required for the security deposit, 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 4. usually able to obtain a more expensive vehicle more often
checking out a used car
1. outside the car 2. the engine 3. inside the car 4. the road test
information gathering
1. personal contacts 2. businesses 3. media 4. independent testing organizations 5. government agencies 6. online reviews
shopping tips
1. timing purchases- buy items on sale 2. purchase location- go to where items are cheap 3. brand comparison- buy cheaper brands which same quality 4. label info- 5. pricing comparison- compare unit pricing
autorepair frauds
1. when checking the oil, attendant puts the dipstick only part way down 2. an attendant cuts a fan belt or punctures a hose 3. garage employee puts liquid on your battery than tries to tell you to get a new one since it is leaking 4. removing air from a tire instead of adding it to convince drivers to buy a new tire 5. attendant puts grease near a shock absorber and tells you that new ones are needed 6. you are charged for 2 gallons of anti freeze but only 1 is put in
leasing disadvantages
1. you have no ownership interest in the vehicle 2. you must meet requirements similar to qualifying for credit 3. additional costs for extra mileage, certain repairs, turning the car in early, or moving to another state
federal trade commission
FTC *requires used cars to have a buyers guide sticker telling them whether the vehicle comes with a warranty and what protection the dealer will provide
capitalized cost
the price of the vehicle *Average buyer pays 92% of list price, leasing arrangement has cap cost of 96% of list price
arbitration
the settlement of a difference by a third party arbitrator whose decision is legally binding
set-price dealers
use no haggling car selling with the prices presented to be accepted or rejected as stated
high balling
when offered a very high amount for a trade in vehicle, with the extra amount made up by increasing the new car price
low balling
when quoted a very low price that increases when add on costs that come last moment
negative equity
when the value of your car is less than the amount you still owe *to avoid this, make a large down payment, have a short loan term (less than 5 years) and pay off the loan faster than the value of the vehicle declines