Personal Finance Chapter 8

Highballing

When offered a very high amount for a trade-in vehicle, with the extra amount made up by increasing the new-car price.

Lowballing

When quoted a very low price that increases when add-on costs are included at the last moment

Preshopping for a Car

-Define needs and obtain relevant product information -Problen identification -Information gathering (personal contacts, business organizations, media sources, independent testing organizations, government agencies)

Warranty

A written guarantee from the manufacturer or distributor of a product that specifies the conditions under which the product can be returned, replaced, or repaired.

Negative Equity

After a few years, the value of the car is less than the amount you still owe on it

Service Contracts

Agreements between a business and a consumer to cover the repair costs of a product; frequently called extended warranties, but aren't so. For a fee, they protect the buyer from high serving costs.

Car-Buying Services

Help buyers obtain a specific vehicle at a reasonable price.

Used-Car Warranty

If you buy a car without warranty, all repairs are your responsibility. Some cars have implied warranty, meaning the car is guaranteed to work, at least for awhile.

Store-Brand and Private-Label

Products sold by one chain of stores and are low-cost alternatives to famous-name products. Usually these products have labels that identify them with a specific retail chain.

National-Brand

Products that are highly advertised and available in many stores; they are usually more expensive than non brand products, but offer consistency of quality for which people are willing to pay

Prepaid Legal Services

Provide unlimited or reduced-fee legal assistance for a set fee

Sticker Price

Suggested retail price printed on a vehicle label

Mediation

The attempt by an impartial third party to resolve a difference between two parties through discussion and negotiation

Money Factor

The interest rate being paid on the capitalized cost

Arbitration

The settlement of a difference by a third party whose decision is legally binding

Residual Value

Expected value of the vehicle at the end of the lease

Post-Purchase Activities of Buying a Car

-Automobile opération costs (depreciation) -Motor vehicle maintenance -Automobile servicing sources

Label Information

-Federal law requires that food labels contain the company name/address, ingredients, nutrients, and food allergy warnings. -Appliances must include information about operating costs -Open dating

Common Frauds

-Foreign scams -Disaster-related fraud -Credit repair -Employment scams -Crowdfunding scams -Fraudulent diet and health claims -Online dating scams -Bogus campus card -Internet pyramid scheme -Phishing -Pharming -Fraudulent hotline

Comparing Prices

-Greater convenience of stores usually means higher prices -Ready-to-use products have higher prices -Large packages are usually best to buy, but compare unit pricing -Sales do not always mean money is saved

Evaluating Alternatives of a Car

-Selecting vehicle options (mechanical devices to improver performance, convenience options, aesthetic features) -Comparing used vehicles (new car dealers, used car dealerships, individuals selling old cars, auctions, used car superstores, and online used cars) -Leasing (contractual agreement with monthly payments for the use of an automobile over a set time period; at the end of which, the vehicle is usually returned)

Resolving Consumer Complaints

1. Initial communication 2. Communication with the company 3. Consumer agency assistance 4. Legal action

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

Class-Action Suit

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

Implied Warranty

Covers a product's intended use or other basic understanding that are not in writing. -Warranties of title indicate that the seller has the right to sell the product -Warranties of merchantability guarantees that the product is fit for the ordinary uses it is intended for

Limited Warranty

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

Express Warranty

Created by the seller or manufacturer and has two forms: 1. The full warranty 2. The limited warranty

Consumer Complaints

Defective products, low quality, short product lives, unexpected costs, deceptive pricing, fraudulent business practices

Open Dating

Describes the freshness or shelf life of a perishable product.

Set-Price Dealers

No-haggling car-selling strategy, with prices to be accepted or rejected as stated.

Auto Broker

Offer desired models with options ranging 50-200 dollars over the dealer's cost

Timing Purchases

One can obtain purchases at a bargain price because they go on sale at certain times of the year (like winter coats)

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

Disadvantages of Leasing

-No ownership interest in the vehicle -Need to meet requirements similar to credit qualifications -Possible additional costs incurred for extra mileage, repairs, turning the car in early, or moving to another state

Minimize Consumer Problems

-Obtain recommendations from friends, family, and online reviews -Verify company affiliations, certifications, licenses -Understand sales terms, return policies, and warranty provisions

Advantages of Leasing

-Only a small cashflow is needed form the security deposit -Monthly lease payments are usually lower than financing options -Agreement provides detailed records for business purposes -You can usually obtain a more expensive vehicle more often

Determining Purchase Price of a Car

-Used car price negotiation (check ads, number of miles, features, options) -Price bargaining for new cars -Comparing financial alternatives (cash or credit)

Cooperative

A nonprofit organization whose member-owners may save money on certain products or services.

Rebate

A partial refund of the price of a product

Invoice Price

An amount less than the sticker price

New-Car Warranty

Provide buyers with assurance of quality; they vary in time, mileage, and parts they cover. The main conditions are: -Coverage of basic parts against defects -Power train coverage for the engine, transmission, and drive train -Corrosion warranty (holes, not surface rust) -Whether or not warranty is transferrable to other owners, in the form of a deductible

Unit Pricing

The use of a standard unit of measurement to compare the prices of packages of different sizes

Impulse Buying

Unplanned purchasing that can result in financial problems

Commonly Overlooked Buying Trade-Offs

-Paying a higher price over time by using credits for items needed now -Buying unknown or poor quality brands that are less expensive -Ordering online to save time, but makes returning, repairing, and replacing more difficult -Time and effort taken to comparison shop

Full Warranty

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