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