chapter 8 vehicles and other major purchases n.
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CHAPTER 8 VEHICLES AND OTHER MAJOR PURCHASES. FIN 235 SPRING 2013. I. LEARNING OBJECTIVES. Steps in the planned buying process The process of comparison shopping Negotiate and decide effectively when making major purchases Use effective complaint procedures.

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Presentation Transcript
i learning objectives
I. LEARNING OBJECTIVES
  • Steps in the planned buying process
  • The process of comparison shopping
  • Negotiate and decide effectively when making major purchases
  • Use effective complaint procedures
ii preparations before the buy decision
II. PREPARATIONS BEFORE THE BUY DECISION
  • Determine what you need in contrast to what you would like (need vs. want)
  • Gather information on manufacturers’ various makes and models
    • Features
    • Warrantees
      • Expressed vs. Implied
      • Full vs. Limited (paying for parts and labor during warrantee period)
      • Extended warrantees can be quite expensive and have restrictions
      • Ditto for service contracts
ii preparations before the buy decision1
II. PREPARATIONS BEFORE THE BUY DECISION
    • Mileage and maintenance costs
    • New versus pre-owned (or refurbished)
    • Trade-in value
  • Comparison Shopping
    • Finding the best deal
    • Financing Costs
iii factors affecting the financing decision
III. FACTORS AFFECTING THE FINANCING DECISION
  • Leasing versus Buy
    • Hidden costs of leasing: end of lease value is affected by mileage and damage
    • Most leases require significant upfront cash (capital reduction)
    • All leases have an implicit cost of capital
    • You do not build equity (ownership)
    • Leasing is best if costs can be written off a business expense
    • Early termination fees can be quite costly
  • Balloonloans to be avoided
  • Gap insurance can be quite costly
iv negotiating the deal
IV. NEGOTIATING THE DEAL
  • An Informed buyer is a strong buyer
  • MSRP: Mfr. Suggested Retail Price (the fair trade price price)
  • Dealer Invoice price (what they “pay” to manufacturer)
  • Holdbacks reduce factory invoice to dealer
  • Interest rate may be subject to negotiation
  • Trade-in values affect cost of the deal and dealers ultimate profits
  • Make the final decision at home rather than the dealership
v what to do if the purchase goes south
V. WHAT TO DO IF THE PURCHASE GOES SOUTH
    • Three day cooling off period works only if purchase occurs outside the store
    • Many states have lemon laws
    • Complaint may lead to mediation or arbitration
    • Small claims court ($500 to $2500 is typical range)
  • homework
    • Do the Math: 3, 4
    • On the ‘Net: 1, 2
    • Be Your Own Personal Financial Planner
      • 5 – Rebate or Low-Rate Financing?
      • 6 – Major purchase Decision-making Grid