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Chapter 6 Consumer Purchasing Strategies and Wise Buying of Motor Vehicles McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights.

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Presentation on theme: "Chapter 6 Consumer Purchasing Strategies and Wise Buying of Motor Vehicles McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights."— Presentation transcript:

1 Chapter 6 Consumer Purchasing Strategies and Wise Buying of Motor Vehicles McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2 Wise Buying of Motor Vehicles and Other Purchases
Chapter Objectives Identify strategies for effective consumer buying Implement a process for making consumer purchases Describe steps to take to resolve consumer problems Evaluate legal alternatives available to consumers 6-2

3 Objective 1 Identify Strategies for Effective Consumer Buying
Daily buying decisions involve trade-offs Wide variety of economic, social and personal factors affect daily buying habits Long term stability is achieved by not spending your entire current income Overspending leads to misuse of credit 6-3

4 Practical Purchasing Strategies
Timing purchases Price variations with the time of the year Store selection Location, price, selection, services Brand Comparison Private-label or store brands vs. national brands Label Information Open dating 6-4

5 Practical Purchasing Strategies
Price comparison Unit pricing = standard of measurement Coupons & rebates More store convenience higher prices Ready-to-use products higher prices Large is not always the best buy “Sale” prices not always a savings Online sources can save time 6-5

6 Price Analysis & Comparison Shopping
Prices can vary for all types of products Assess differences in quality relative to price Price and quality are not always closely related Comparison Shopping can be beneficial when: Buying expensive or complex items Buying items that you purchase often Easily done with ads, catalogs, or online Different sellers offer different prices and services Product quality or prices vary greatly 6-6

7 Wise Buying Techniques
Page 191 6-7

8 Practical Purchasing Strategies
Warranties Written guarantee from manufacturer or distributor specifying the conditions under which the product can be returned, replaced or repaired. Express warranty (usually written) Full Warranty or Limited Warranty Implied warranty Warranty of title Warranty of merchantability 6-8

9 Warranties Used Car Warranties New Car Warranties Service Contracts
FTC required “buyers’ guide sticker” Warranty of merchantability New Car Warranties Basic parts against defects Power train coverage Corrosion warranty Service Contracts Extended warranty 6-9

10 Research-Based Buying Major Purchase Decision-making Process
Phase 1: Pre-shopping Activities Problem identification Information gathering Phase 2: Evaluating Alternatives Attribute assessment & comparison Price analysis Comparison shopping 6-10

11 Research-Based Buying Major Purchase Decision-making Process
Phase 3: Selection and Purchase Negotiation Payment alternatives Acquisition and installation Phase 4: Post-purchase Activities Maintenance and operation After-sale service alternatives Resolution of purchase concerns 6-11

12 Objective 2 Implement a Process for Making Consumer Purchases
A Research-based Approach to Buying a Motor Vehicle Page 194 6-12

13 Buying a Motor Vehicle Phase 1 – Pre-shopping Activities
Problem Identification Focus purchasing activities Information Gathering Personal contacts Business organizations Media information Independent testing organizations Government agencies Online sources 6-13

14 Buying a Motor Vehicle Phase 2 - Evaluating Alternatives
Purchase alternatives Selecting vehicle options Comparing used vehicles Leasing a motor vehicle 6-14

15 Buying a Motor Vehicle Purchase Alternatives
Now or later? Cash or credit? Which brands? Which dealers? Rent vs. Buy? 6-15

16 Buying a Motor Vehicle Selecting Vehicle Options
Performance 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 Metallic paint Special Trim Leather interior Sunroof 6-16

17 Buying a Motor Vehicle Comparing Used Vehicles
Common sources of used cars include: New-car dealers Used-car dealers Private sales Auctions and dealers sell previously owned cars Used-car superstores such as CarMax 6-17

18 Buying a Motor Vehicle Leasing a Motor Vehicle
Advantages Small cash outflow Lower monthly payments than buying Lease provides detailed records - helps if you use your car for business purposes Able to obtain a more expensive car more often Disadvantages No ownership interest Must meet requirements May have additional costs for extra mileage, turning the car in early, or for certain repairs 6-18

19 Buying a Motor Vehicle Financial Aspects of Leasing
Capitalized cost = price of the vehicle Average buyer pays 92% of list Average leaser pays 96% of list Money factor = interest rate Payment schedule Monthly payment amount number of payments Residual value = expected value of the vehicle at the end of the lease Return, keep, or sell the vehicle. If the residual value < market value, return it 6-19

20 Buying a Motor Vehicle Phase 3 - Determining Purchase Price
Negotiation may lower price or add features Have all the necessary information Deal with a person who has the authority to give you a lower price or additional features Used-Car Price Negotiation Edmund’s Used Car Prices - Kelly Blue Book - The more new cars sold the more used cars there are for sale, keeping the prices down 6-20

21 Buying a Motor Vehicle Price Bargaining for New Cars
Sticker price = suggested retail price Includes base price + accessories Invoice price = dealers cost Consumer Reports: Edmund’s New Car Prices: Until price of the new car is settled: Don’t mention any trade-in Don’t mention dealer financing 6-21

22 Buying a Motor Vehicle Price Bargaining for New Cars
Price bargaining - compare dealers Set-price dealers Car buying services = auto broker $50 - $200 over dealer’s cost Sales agreement = specific details Consumer protection for new-car buyers Warranties State lemon laws 6-22

23 Buying a Motor Vehicle Price Bargaining for New Cars
Sales Techniques to Avoid Lowballing – low price quote increases with last minute add-ons Highballing – high trade-in offer + high new car price “How much can you afford per month?” Never leave a deposit unless ready to buy “Your price is only $100 above our cost.” Sales agreements with preprinted amounts 6-23

24 Buying a Motor Vehicle Comparing Financial Alternatives
Financing sources Banks, credit unions, other financial institutions, finance companies, or dealer financing Get preapproved for a certain amount Low payment or low rate ≠ best Upside down equity = car is worth less than amount still owed on the loan (negative equity) Check the APR and any rebates 6-24

25 Buying a Motor Vehicle Phase 4: Post-purchase Activities
Maintenance and ownership costs are associated with some purchases Correct use yields improved performance and fewer repairs Investigate, evaluate and negotiate a variety of servicing options Complain if not satisfied with a purchase 6-25

26 Buying a Motor Vehicle Phase 4: Post-purchase Activities
Automobile Operating Costs Fixed Costs Depreciation Interest on loan Insurance License, registration and taxes Variable Costs Gas and oil Tires Maintenance and repairs Parking and tolls 6-26

27 Buying a Motor Vehicle Phase 4 - Post-purchase Activities
Automobile Operating Costs Keep good expense records Follow the maintenance schedule in the manual 6-27

28 Buying a Motor Vehicle Phase 4 - Post-purchase Activities
Vehicle Servicing Options Car dealers Service stations Independent Auto Repair Shops Mass Merchandise Retailers like Sears and Wal-Mart Specialty shops such as oil/lube, muffler, transmission, and tire shops Be alert for signs of fraud 6-28

29 Objective 3 Describe Steps to Take to Resolve Consumer Complaints
Resolving Consumer Complaints Step 1: Return to place of purchase Calm, rational, persistent approach Step 2: Contact company headquarters “Contact Us” on firm’s website Use or letter 6-29

30 Resolving Consumer Complaints
Step 3: Obtain consumer agency assistance BBB provides pre-purchase information File a complaint on line at Mediation - third party negotiates (nonbinding) Arbitration - decision is binding State consumer protection office or agency Step 4: Take legal action 6-30

31 Objective 4 Evaluate Legal Alternatives Available to Consumers
Legal Options for Consumers Small claims court Class action suits Using a lawyer Other legal alternatives Legal aid society Prepaid legal services 6-31

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