Personal Finance Chapter 6- Consumer Purchasing Strategies and Wise Buying of Motor Vehicles

Limited Warranty

Covers only certain aspects of the product, such as parts, or requires buyer to incur part of the costs for shipping or repairs

Invoice Price

Dealer's cost

Express Warranty

Full or limited warranty

Sticker Price

Suggested retail price

Implied Warranty

covers a product's intended use or other basic understandings that are not in writing -warranty of title (right to sell) -warranty or merchantability (fit for intended use)

Residual Value

expected value of the vehicle at the end of the lease -if residual<market value, return it

Highballing

high trade-in offer + high new car price

Money Factor

interest rate

Lowballing

low price quote increases with last minute add ons

Legal Aid Society

one of a network of publicly supported community law offices that provide legal assistance to consumers who cannot afford their own attorney

Capitalized Cost

price of the vehicle -92% avg buyer -96% avg leaser

Prepaid legal services

unlimited legal assistance for a set fee

Disadvantages to leasing a motor vehicle

-no ownership interest -must meet requirements -may have additional costs for extra mileage, turning in early, repairs

Advantages of Leasing a Motor Vehicle

-small cash outflow -lower monthly payments than buying -lease provides detailed records -able to obtain more expensive car more often

Legal Options for Consumers

-small claims court -class action suits -using a lawyer -legal aid society -prepaid legal services

Used Car Warranty

-FTC requires used cars to have a buyer's guide sticker -warranty of merchantability

Practical Purchasing Strategies

-Timing purchases -Purchase location -Brand comparison -Label information -Price Comparison -Warranties

New Car Warranty

-basic parts against defects -power train coverage -corrosion warranty

Fixed Automobile Operation Costs

-depreciation -interest on loan -insurance -license, registration, taxes

Variable Automobile Operation Costs

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

Research Based Buying

Phase 1- pre-shopping activities Phase 2- Evaluating alternatives Phase 3- Selection and Purchase Phase 4- Postpurchase activities

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

Full Warranty

a defective product can be fixed or replaced during a reasonable amount of time

Class Action Suits

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

Service Contract

an agreement between a business and a consumer to cover the repair costs of a product -extended warranty