Chapter 8 automobiles and other major purchases
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Chapter 8: Automobiles and Other Major Purchases. Understand several guidelines to save money on major purchases. Employ the three steps in wise buying that occur prior to interacting with sellers. Comparison shop when buying or leasing vehicles and other major purchases. Objectives.

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Chapter 8: Automobiles and Other Major Purchases

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Chapter 8 automobiles and other major purchases

Chapter 8: Automobiles and Other Major Purchases


Objectives

Understand several guidelines to save money on major purchases.

Employ the three steps in wise buying that occur prior to interacting with sellers.

Comparison shop when buying or leasing vehicles and other major purchases.

Objectives


Objectives1

Negotiate effectively and make intelligent decisions when undertaking major expenditures.

Evaluate your purchase decisions as a guide for future behavior.

Objectives


Guidelines for wise buying

Guidelines for Wise Buying

  • Control buying on impulse

  • Pay cash

  • Buy at the right time

  • Don’t pay extra for a “name”

  • Recognize the high price of convenience shopping

  • Use life-cycle planning for major purchases

  • Calculate unit pricing or price per hours worked.


Steps before interacting with seller

Steps Before Interacting with Seller

  • Prioritize wants

  • Do pre-shopping research

    • Price

    • Trade-in

    • Cost of financing

  • Fit expenditure into budget


  • Purchasing a car a research based approach phase 1 preshopping activities

    Purchasing 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


    Phase 2 evaluation of alternatives

    Phase 2: Evaluation of Alternatives

    • Comparison shopping.

    • Selecting vehicle options-convenience, appeal, etc.

    • Comparing used vehicles- www.carmax.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.

    • 8-8


    Buying vs leasing an automobile

    BUYING VS LEASING AN AUTOMOBILE


    Phase 3 determining purchase price

    Phase 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

    • 8-9


    Phase 4 postpurchase activities

    Phase 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.

    • 8-10


    Utah lemon law

    Utah Lemon Law

    • Consumers who buy or lease a new automobile or motor home with significant defects that can't be repaired, or in other words is simply a "lemon," can obtain relief under the Utah New Motor Vehicle Warranties Act or "Lemon Law."

    • The Utah Lemon Law applies to new cars under warranty and was extended in 1990 to also cover new leased vehicles and motor homes. The Lemon Law does NOT apply to used vehicles.

    • For your vehicle to qualify as a "lemon" under the Utah Lemon Law:

    • The vehicle must have been purchased in the state of Utah;

    • The vehicle must be new and under warranty;

    • The vehicle must weigh less than 12,000 pounds;

    • The defect must "substantially impair the use, market value or safety of the vehicle";

    • The vehicle must have been to the manufacturer to have the same defect resolved at least four times OR out of service to the consumer a total of 30 days DURING the first year or the warranty period, whichever is less (if your problems occur AFTER this time period, you do NOT qualify for the Utah Lemon Law);

    • The defect cannot be the result of abuse, neglect or unauthorized modifications of the vehicle; AND

    • The consumer must go through any informal dispute settlement or arbitration procedure the manufacturer may have established. If your vehicle meets ALL of the criteria, your next step is to file a complaint with the Division of Consumer Protection. Include with your complaint COPIES of any relevant documents, including service records, and arbitration or dispute settlement records.

    • After your vehicle is determined to be a "lemon", you may qualify for either a replacement or a cash refund. The manufacturer may charge you a "reasonable" amount for use of the vehicle as prescribed by the Utah Lemon Law, usually 10 to 23 cents per mile. You can have the Division try to obtain restitution for you or you can take private action with your own attorney.


    Comparison shopping

    Comparison Shopping

    • Warranties

      • Implied

      • Express

  • Service contracts

  • Leasing vs. buying

  • Balloon financing


  • Chapter 8 automobiles and other major purchases

    • Negotiate and Decide On Best Deal

    • Successful negotiations require information

    • Make the decision

    • Evaluate the decision


    Financial aspects of leasing

    Financial Aspects of Leasing

    • Capitalized cost - the price of the vehicle. Average buyer pays 92% of list, average person who leases pays 96% of list.

    • Money factor - interest rate.

    • Monthly payment amount and number of payments.

    • Residual value - expected value of the vehicle at the end of the lease. You may decide to return, keep, or sell the vehicle. If the residual value is less than market value, return it.

    • 8-20


    Decision making grid

    Decision Making Grid

    • *Using a 10-point scale.


    Help when buying a new vehicle

    Buying services

    www.comsumerreports.org

    Internet sites

    www.buyingadvice.com

    www.carmax.com

    www.carsbelowinvoice.com

    www.edmunds.com

    www.autosite.com

    http://auto.consumerguide.com

    Help When Buyinga New Vehicle

    • 8 - 14


    Rental car basics

    Type

    Price and gas payment

    Additional fees

    Reservations

    Mileage restrictions

    Insurance and inspection

    Rental Car Basics


    Get things fixed

    Get estimate in advance

    Ask how long repairs will take

    Get claim check

    Ask to be given all replaced parts

    Be available when at-home repairs are made

    Get written receipt

    Get Things Fixed


    Choose between low interest and rebate

    Compare actual costs

    Consider opportunity cost of rebate

    Add opportunity cost of foregone rebate to finance charge of dealer financing

    Choose Between LowInterest and Rebate


    Buy a used vehicle

    Decide on features and options

    Decide how much to spend

    Select makes/models in price range

    Start search

    Check selection carefully

    Negotiate and decide

    Buy a Used Vehicle


    Get the most for your car buying dollar

    Buy used vehicles

    Buy used vehicles from private owners

    Visit dealerships at least three times

    Negotiate price first

    Consider leasing

    Use up your vehicles

    Get the Most for YourCar-Buying Dollar


    Resolving company complaints

    Resolving Company Complaints

    • Return to Place of Purchase

    • Contact Company Headquarters

    • Obtain Consumer Agency Assistance

      • Mediation

      • Arbitration

    • Take Legal Action

      • Small Claims Court

      • Class-Action Suits


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