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

True cost of leasing

Capitalized cost Money factor Payment schedule Residual value

What legal action would be the most appropriate to take: A group of telephone customers were overcharged by $1.10 a month over the past 22 months.

Class-action suit

What actions are appropriate when buying a used car?

Compare prices

Evaluating alternatives

Attribute assessment with a comparison of product features Price analysis consider the cost at various locations Comparison shopping

In what situations can comparing prices help in purchasing decisions?

Comparing prices can be helpful when buying expensive items, competing brands are available, different package sizes are available, and product quality varies.

Steps to resolve consumer complaints

1-Initial communication 2-Communicate with the company 3-Consumer agency assistance 4-Legal action

Car-buying service

A business that helps buyers obtain a specific new car at a reasonable price. Also called: AUTO BROKER

Auto Broker

A business that helps buyers obtain a specific new car at a reasonable price. Also called: CAR-BUYING SERVICE

Class-action suit

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

Consumer complaints 4-Legal action

Consider bringing case to small claims court Determine if class-action suit is appropriate Seek assistance from a lawyer or legal organization

Express warranty

Covers only certain aspects of the product i.e. parts

Limited warranty

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

Open dating

Describes the freshness or shelf life of the perishable product.

When might leasing a motor vehicle be appropriate

For business use Changing vehicles every few years

Implied warranty

Guarantees that the product is fit for the ordinary uses for which it is intended. Guaranteed to do what it is supposed to do. i.e. toaster must toast bread MP3 player must play music

Leasing

a contractual agreement with monthly payments for the use of an automobile over a set time period 3, 4, 5 years.

National-brand products

Highly advertised items available in many stores

Warranty of title

Indicates the seller has the right to sell the product.

What legal action would be the most appropriate to take: A low-income person wants to obtain the services of a lawyer to file a product-liability suit.

Legal aid society

What does overspending lead to?

Misuse of credit Financial difficulties

In what situations might you use the services of a lawyer?

More complicated matters, i.e. writing a will, settling a real estate purchase, or suing for injury damages.

"As is"

No warranty and the dealer assumes no responsibility for any repairs.

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.

In what types of situations would small claims court and class-action suits be helpful?

Small claims situations filing a claim involving amounts below a set dollar limit maximum varies from state to state ranging from $500 - $10,000, limit between $1,500 and $3,000. Class-action suits situations (a number of people having the same complaint) auto owners who were sold unneeded replacement parts, a group of investors who sued a brokerage company for unauthorized buy-and-sell transaction that resulted in high commission charge.

Store-brand and Private-lable products

Sold by one chain or stores Are low-cost alternative to famous-name products

What are the factors that affect daily buying habits?

Spending Saving Investing Achieving personal financial goals

Pre-shopping

Start by problem identification to set a goal Gather information to benefit from the buying experience.

Full warranty

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

Arbitration

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

Mediation

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

Sticker price

The base price of the car with costs of added features.

What is the range available for negotiating for a new car.

The difference between the sticker price and the dealer's cost.

Residual value in leasing

The expected value of the car at the end of the lease

Money factor in leasing

The interest rate paid on the capitalized (price of car) cost

Depreciation

The loss in value due to time and use.

Capitalized cost in leasing

The price of the car

Automotive service contract

covers repairs not included in the manufacturer's warranty.

Comparison shopping

the process of considering alternative stores, brands, and prices.

Compulsive buying

uncontrollable desire to shop

Leasing advantages

1- Only a small cash outflow for security deposit vs. buying require a large down payment. 2- Monthly lease payments are lower than monthly financing payments. 3- Lease agreement provides detailed records for business purposes. 4- Able to obtain a more expensive vehicle

How can most consumer complaints be resolved?

At the original sales location, as you talk with the salesperson, customer service person, or store manager.

Leasing disadvantages

1- Have no ownership interest in vehicle 2- Must meet requirements similar to qualify for credit. 3- Additional costs may be incurred for extra mileage, certain repairs, turning the car early, or a move to another state.

The two vital factors in negotiating

1- Having all the necessary information about the product and buying solution 2- Dealing with a person who has the authority to give you a lower price or additional features. i.e. owner, store manager

the major sources of consumer information

1-Personal contacts - allow you to learn about product performance, brand quality, and price from others 2-Business organizations - offer advertising, product labels, and packaging that provide information about price, quality, and availability 3-Media information - (TV, radio, newspapers, magazines, websites) can provide valuable information with purchasing advise. 4-Independent testing organizations - i.e. Consumers Union - provide information about the quality of products and services each month in Consumer Reports. 5-Government agencies - local, state, and federal provide publications, toll-free phone numbers, websites, and community programs 6-Online reviews -provide buying guidance and shopping suggestions- be cautions many are fictitious online pages

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

Rebate

A partial refund of the price of a product.

Lemon law

A refund for the vehicle after the owner has made four (4) attempts to obtain servicing within 12 months of purchase or 12,000 miles

How does a service contract differ from a warranty

A service contract is a paid agreement for repairs. A warrant is a feature offered by a manufacturer or distributor.

Warranty

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

Post-purchase activities

After purchase Proper maintenance and operation Id and compare after-sale service alternatives Resolution of any purchase concerns

Service contract

An agreement between a business and a consumer to cover the repair costs of a product, for a fee. Also called: EXTENDED WARRANTIES - which are not warranties.

Extended Warranty

An agreement between a business and a consumer to cover the repair costs of a product, for a fee. Also called: SERVICE CONTRACT

Invoice price

An amount less than the sticker price, known as dealer's price

New-car warranties

Provide buyers with an assurance of quality. The main conditions of a new-car warranty are 1-Coverage of basic parts against defects 2-Power train coverage for the engine, transmission, and drive train 3-The corrosion warranty applies only to holes due to rust, not to surface rust. 4-A statement regarding whether the warranty is transferable to other owners of the car, details about the charges that will be made for major repairs in the form of a deductible.

Lowballing

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

Consumer complaints 1-Initial communication

Return to place of purchase or contact online Provide detailed explanation & action desired Be pleasant yet persistent in obtaining a resolution

Consumer complaints 3-Consumer agency assistance

Seek guidance from local, state, or federal consumer agency Determine if any laws have been violated in situation Consider the use of mediation or arbitration

What legal action would be the most appropriate to take: A person is attempting to obtain a $150 catering deposit that was never returned.

Small claims court

Payment schedule in leasinng

The monthly payment amount & the number of payments

Upside-down

The value of car may be less than the amount owed. Also called: NEGATIVE EQUITY

Negative equity

The value of car may be less than the amount owed. Also called: UPSIDE-DOWN

Upside-down (negative equity)

The value of item is less than the amount owed

Impulse buying

Unplanned purchasing.

Set-price dealers

Use no-haggling car selling with the prices presented to be accepted or rejected as stated.

Unit price

Uses a standard unit of measurement to compare the prices of packages of different sizes. Formula: Unit price = price of the item / the number of units of measurement.

Certified pre-owned (CPO)

Vehicles nearly new cars that come with the original manufacturer's guarantee of quality

What are common causes of consumer problems and complaints?

Warranties - Advance Factors Service availability Defective products Low quality Short product lives Unexpected costs Deceptive pricing Poor repairs

Selection and purchase

When making your final choice Negotiate to obtain lower price or added quality Payment alternatives cash and various credit plans Assessment of acquisition and installation that might be encountered

Highballing

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

The major buying decisions should be based on a specific decision-making four phase process

1-Pre-shopping activities - -ID problem to set goal and focus on purchasing activities\ -Gather info to benefit from others' buying experience 2-Evaluating alternatives -Compare product features -Compare prices at various locations -Compare shopping activities to evaluate shopping locations. 3-Section and purchase -Negotiate to obtain lower price or added quality -Payment alternatives i.e. cash, credit plans 4-Postpurchase activities -Proper maintenance and operation -ID and compare after-sale service alternatives -Resolution of any purchase concerns that may occur.

Research-based buying phases

1-Pre-shopping activities 2-Evaluating alternatives 3-Selection and purchase 4-Postpurchase activities

-What legal action would be the most appropriate to take: A consumer wants to settle a dispute out of court with the use of a legally binding third-party.

Arbitration

How does arbitration differ from mediation?

Arbitration is the settlement of a difference by a 3rd-party - the arbitrator- whose decision is legally binding. Mediation involves the use of a 3rd-party - mediator - tries to resolve a conflict between a customer and a business through discussion and negotiation and is a non-binding process.

Consumer complaints to Communicate with company

Send an email with detail of situation Post your concerns on company's online social media sites Comment on a blog or a consumer review website