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