Consumer Economics Copyright©2009 Taylor & Francis Group, an informa business Chapter 12 Being a Better Consumer of Housing and Vehicles

Learning Objectives Define consumer unit and describe typical expensesExplain the pros and cons of owing vs renting housesExplain the different types of home mortgages Discuss change points in people’s lives and their effect on consumption Discuss the cost of utilitiesExplain the pros and cons of leasing vs owing a vehicleDiscuss buying vehicles and what deceptive practices to avoid

Introduction Housing is the largest budget item for most people “Household” and “consumer unit” are used interchangeably Making good household decisions for housing and vehicles are complicated by many factors

Leasing and Renting Housing Advantages of leasing vs. renting Landlord-tenant disputes Home ownership Life change points and consumption Homes as investments Renting vs buying homes: Time factor

Decision Points Readiness to buy: determine how much you can afford financially Consider the pros and cons of renting and buying Understand the mortgage application process

Speeding up the Mortgage Application Process Speed up the process by having: 1.A legal description of the property and the price 2.Income, recent pay stubs 3.Real estate background, what was owned or rented before 4.Liquid assets: cash, checking and savings accounts, bank statements, insurance policies and other proof 5.Personal information: social security number, address

Decision Points Housing types Housing quality Mortgages

Types of Mortgages and Abuses Fixed rate conventional Adjustable-rate mortgages (ARMs) Predatory home mortgage abusesReverse mortgagesRedlining

Utilities: Costs & Environmental Impact Consider ways to reduce monthly costs Look for environmentally friendly home features

Vehicles Types of leases Vehicle preleasing and prebuying: Information search Consider the pros and cons of leasing

Buying Vehicles Consider the pros and cons of buying New cars: beware sales techniques Lemon laws Used cars: follow the buyers guide Unfair vehicle pricing

Chapter Summary Homes and vehicles are major consumer buysMany federal agencies aid and protect buyersPeople’s lives change; so do purchasesConsider the pros and cons of buying vs leasing