PowerPoint PresentationFinancial Implications of Purchasing DecisionsSlide 3Personal Consumer ProtectionPractical Purchasing StrategiesSlide 6Purchasing a Car: A Research-Based Approach - Phase 1: Preshopping ActivitiesPhase 2: Evaluation of AlternativesPhase 3: Determining Purchase PricePhase 4: Postpurchase ActivitiesThe Used Car Inspection ProcessBuying a Used VehicleUsed-Car Price NegotiationGathering InformationSelecting OptionsDetermining a Purchase PriceFinancing an Automobile PurchaseLeasing a Motor VehicleTypes of LeasesFinancial Aspects of LeasingSlide 21Costs of Operating a CarSlide 23Steps in Resolving Consumer ComplaintsChapter 8Consumer Purchasing Strategies and Legal ProtectionConsumer Purchasing Strategies and Legal ProtectionMcGraw-Hill/IrwinCopyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.Financial Implications ofPurchasing Decisions•Commonly overlooked trade-offs when buying include…Paying a higher price over time by using credit to buy items you need now.Buying unknown, possibly poor-quality brands, that are less expensive.Selecting brands that may be difficult to service or repair.Ordering by mail or online to save time and money, but return or repair may be difficult.Taking time and effort to comparison shop.8-2Consumer pricesInterest ratesSupply/demandBrand nameWarrantyProduct QualityTax ratesGovt. regs.Economic FactorsLifestyleCultureAttitudesAdsMedia/InternetHobbiesPeer groupSocial FactorsSex and ageMarital statusOccupation Personal FactorsIncomeEducationFamily sizeHousing typeEthnic groupReligionConsumer BuyingInfluences8-3Personal Consumer Protection•To protect yourself as a consumer…Deal with reputable companies.Avoid signing contracts, documents you do not understand.Be cautious about offerings that seem too good to be true - they probably are.Compare the cost of buying on credit with the cost of paying cash. Compare interest rates the seller offers with other sources.Avoid rushing to get a good deal.8-4Practical Purchasing StrategiesTiming purchases.Be aware if the price varies with the time of the year.Store selection.Choice of retailer depends on location, price, product.Cooperatives -non-profit organization; members save money.Comparison shopping of store and national brands; avoid impulse buying (unplanned purchasing).Look for information on label and open dating.8-5Practical Purchasing StrategiesPrice comparison.Unit pricing provides a standard of measurement.Coupons (online: coolsavings.com; centsoff.com; couponsurfer.com) and rebates (partial refund).Convenience & ready-to-use products may mean higher prices. Large is not always the best buy, and “Sale” prices vary among stores.•Evaluate warranties. Full or limited express warranties, usually written.Implied warranty of merchantability-fit for normal use.•Service contracts -also called extended “warranties.”(continued)8-6Purchasing a Car: A Research-Based Approach - Phase 1: Preshopping ActivitiesProblem identification.Information gathering.Personal contacts.Media information-television, websites Independent testing organizations- Consumer ReportsGovernment agencies. Online Sources – www.edmunds.com, www.caranddriver.com, www.autoweb.com 8-7Phase 2: Evaluation of Alternatives •Comparison shopping.•Selecting vehicle options-convenience, appeal, etc.•Comparing used vehicles- www.carmax.com www.americasautomall.com, www.carfax.com •Leasing an automobile 1) lower payments, small initial cash outlay 2) no ownership in vehicle 3) maximum # of miles/year; charged for extra miles. 4) know the capitalized cost of the lease, the money factor, the monthly payment, number of payments, and the residual value.8-8Phase 3: Determining Purchase Price•Negotiation Know necessary information about the product.Deal with a person of authority to give you a lower price or additional features.Used-cars: Check newspaper ads, Kelly Blue Book (www.kbb.com), www.edmunds.com New cars: Set-price dealers, car-buying servicesCompare financing alternatives.Variety of lenders-some lenders may pre-approve you.Avoid being upside-down in your car.Look for rebates or low-interest financing.Consider the APR, total finance charge. Check out www.bankrate.com 8-9Phase 4: Postpurchase ActivitiesLemon Laws.Maintenance and ownership costs Use the item correctly to have improved performance and fewer repairs.Investigate, evaluate and negotiate a variety of servicing options.Operation costs; fixed and variable expenses.Automobile servicing sources; dealers, service stations, garages, Wal-Mart, etc.8-10The Used Car Inspection Process•Outside the car.•Inside the car.•The engine.Have a mechanic or technician of your choice estimate the costs of potential repairs.Odometer fraud.•The road test.8-11Buying a Used Vehicle•Sources of used vehicles.New-car dealers.Used-car dealers.Private parties.Auctions, used car superstores such as CarMax, or online at sites such as www.dealernet.com or www.americasautomall.com.•Consumer protection for used car buyers.FTC buyer’s guide in window.Buy from a source that gives some assurance of the vehicle’s reliability.8-12Used-Car Price Negotiation•Price information sourcesEdmund’s Used Car Prices or edmunds.comNADA Official Used Car Guide.Kelly Blue Book kbb.com •The more new cars sold the more used cars there are for sale, keeping the prices down.8-13Gathering Information•Sticker price - suggested retail price. It includes the base price of the vehicle plus accessories.•Invoice price - dealers cost.•Know the dealer’s cost by consulting...Consumer Reports www.consumerreports.org Edmund’s New Car Priceswww.Edmunds.com•Buy in winter, early spring or end-of-month.8-14Selecting Options•Mechanical devices.Engine size, transmission, power steering,cruise control, and antilock brakes.•Comfort and convenience options.Power seats, air conditioning.Stereo systems, power locks.•Aesthetic features.Special paint.Mag wheels.•Service contract - look for costs and exclusions.8-15Determining a Purchase Price•Price bargaining - compare dealers.•Set-price dealers.•Car buying services.Also called an auto broker. $50-$200 over dealer’s cost.•Online car