Chapter 6 Personal Finance

Express Warranty

Usually in written for, it is created by the seller or manufacturer and have two forms: the full warranty and the limited warranty

Service Contracts

AN agreement between a business and a consumer to cover the repair costs of a product. Frequently called extended warranties, they are not warranties.

Implied warranty of merchantability

Guarantees that the product is fit for the ordinary use for which it is intended.

Full Warranty

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

Used-Card Warranties

The Federal Trade Commission requires used cars to have a buyer's guide sticker telling whether the vehicle comes with a warranty and, if so, what protection the dealer will provide.

What are the practical purchasing strategies?

Timing Purchases Store Selection Brand Comparison Label Information Price Comparison

Brand Comparison

1. National brand products are highly advertised items available in many stores 2. Store brand and private label products, sold by one chain of stores, are low cost alternatives to famous name products

Label Information

1. Open dating describes the freshness or shelf life of a perishable product. 2. Phrases such as "Use before May 2016" or "Not to be sold after October 8" appear on most food products.

New-Car Warranties

1. The Main Conditions of a New-Car Warranty are a. Coverage of basic parts against defects b. Power train coverage (engine, transmission, and drive train) c. Corrosion warranty

Price Comparison

1. Unit pricing uses a standard unit of measurement to compare the prices of packages of difference size

Timing Purchases

Certain items go on sale the same time each year. You can obtain bargains by buying winter clothing in mid or late winter, or summer clothing in mid or late summer.

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 such as parts or requires the buyer to incur part of the costs for shipping or repairs.

Types of Warranties

Express Warranty Full Warranty Limited Warranty Implied Warranty Implied Warranty of Merchantability Used Car Warranty New Car Warranty Extended Warranty

Making Major Consumer Purchases: Buying Motor Vehicle (Phase)

Phase 1: Preshopping Activities Phase 2: Evaluating Alternatives Phase 3: Determining Purchase Price Phase 4: Postpurchase Activities

Phase 1: Preshopping Activities

i. Problem Identification 1. Some people always buy the same brand when another brand at a lower price would also serve their needs, or when another brand at the same price may provide better quality ii. Information Gathering 1. The following information sources are frequently helpful a. Personal Contacts b. Business Organizations c. Media Information d. Independent Testing Organizations e. Government Agencies f. Online Reviews

Store Selection

Your decision to use a particular retailer is probably influenced by location, price, product selection, and services available.

Phase 4: Postpurchase Activities

i. Automobile Operation Costs 1. Over your lifetime, you can expect to spend more than $200,000 on automobile-related expenses. These costs involve two categories a. Fixed Ownership Costs b. Variable Operating Costs ii. Motor Vehicle Maintenance 1. People who sell, repair, or drive automobiles for a living stress the importance of regular care. iii. Automobile Servicing Sources 1. Car Dealers 2. Service Stations 3. Independent Auto Repair Shops 4. Mass Merchandise Retailers 5. Specialty Shops III. Resolving Consumer Complaints a. Step 1: Return to the Place of Purchase i. Return to place of purchase or contact online retailer ii. Provide a detailed explanation and the action you desire iii. Be pleasant yet persistent in your efforts to obtain a resolution b. Step 2: Contact the Company Headquarters i. Send an email with the details of the situation ii. Post your concerns on the company's online social media sites iii. Comment on a blog or a consumer review website c. Step 3: Obtain Consumer Agency Assistance i. Seek guidance from a local, state, or federal consumer agency ii. Determine if any laws have been violated in the situation iii. Consider the use of mediation or arbitration d. Step 4: Take Legal Action i. Consider bringing your case to small claims court ii. Determine if a class-action suit is appropriate iii. Seek assistance from a lawyer or legal aid organization

Phase 2: Evaluating Alternatives

i. Selecting Vehicle Options 1. Optional equipment for cars may be viewed in three categories a. Mechanical Devices to improve performance b. Convenience Options c. Aesthetic features to add to the vehicle's visual appeal ii. Comparing Used Vehicles 1. The average used car costs about $10,000 less than the average new car. 2. Common sources of used cars include: a. New-Car Dealers b. Used-Car Dealers c. Individuals selling their used cars d. Auctions e. Used-Car Superstores 3. Certified Pre-Owned vehicles are nearly new cars that come with the original manufacturer's guarantee of quality. iii. Leasing a Motor Vehicle 1. Advantages a. Only a small cash outflow may be required for the security deposit, whereas buying can require a large down payment b. Monthly lease payments are usually lower than monthly financing payments c. The lease agreement provides detailed records for business purposes d. You are usually able to obtain a more expensive vehicle

Phase 3: Determining Purchase Price

i. Used-Car Price Negotiation 1. Two vital factors in negation are a. Having all the necessary information about the product and buying situation b. Dealing with a person who has the authority to give you a lower price or additional features, such as the owner and store manager ii. Price Bargaining for New Cars 1. The dealer's cost, or invoice price is an amount less than the sticker price. The difference between the ticker price and the dealer's costs is the range available for negotiation. iii. Comparing Financing Alternatives 1. You may pay cash; however, most people buy cars on credit. Auto loans are available from banks, credit unions, consumer finance companies, and other financial institutions. Many lenders will pre-approve you for a certain loan amount, which separates financing from negotiating the car price.