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Effective Consumer Buying Strategies: Making Smart Purchases and Legal Protection

Learn strategies for effective consumer buying, implement a buying process, resolve consumer problems, and evaluate legal alternatives. Understand trade-offs, buying influences, wise purchasing strategies, wise online buying activities, and major consumer purchases like buying motor vehicles.

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Effective Consumer Buying Strategies: Making Smart Purchases and Legal Protection

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  1. Chapter 08 Consumer Purchasing Strategies and Legal Protection

  2. Chapter 8Learning Objectives LO8-1 Identify strategies for effective consumer buying. LO8-2 Implement a process for making consumer purchases. LO8-3 Determine steps to take to resolve consumer problems. LO8-4 Evaluate legal alternatives available to consumers. 8-2

  3. Consumer Buying Activities LO8-1: Identify strategies for effective consumer buying. • FINANCIAL IMPLICATIONS OF CONSUMER DECISIONS • Daily buying decisions involve a trade-off between current spending and saving for the future • Economic, social, and personal factors influence your spending, saving, and investing choices 8-3

  4. Trade-offs • 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 • Ordering online, which saves time and money, may make it difficult to return, replace, or repair purchases • Taking time and effort to comparison-shop to save money and obtain better after-sale service

  5. Buying Influences • Economic Factors • Inflation, interest rates, tax rates, government regulations, product safety • Social Factors • Lifestyle, interests, hobbies, peer group, culture, advertising, media • Personal Factors • Gender, age, occupation, income, education, marital status, family size

  6. Wise Purchasing Strategies • Comparison shopping is considering alternative stores, brands, and prices • Avoid impulse buying, unplanned purchasing, which can result in financial problems • TIMING PURCHASES • Be aware if the price varies with the time of the year • PURCHASE LOCATION • Choice of retailer depends on location, price, product selection, and services available • Cooperatives: a nonprofit organization; members save money 8-6

  7. Wise Purchasing Strategies(continued) • BRAND COMPARISON • Comparison shopping of store-brand (low cost alternatives to famous-name products) and national-brand (highly advertised) products • LABEL INFORMATION • Information on label can be helpful or just advertising • Federal law requires labels on food • Open dating describes the freshness or shelf life of perishable products 8-7

  8. Wise Purchasing Strategies(concluded) • PRICE COMPARISON • Unit pricing uses a standard unit of measurement to compare prices of packages of different sizes • Coupons help save money on groceries; rebates are a partial refund of price of products • Convenience and ready-to-use products may mean higher prices; large packages are usually the best buy; “Sale” prices may not always mean saving money 8-8

  9. Example: Unit Pricing • To calculate the unit price of an item, divide the cost by the number of units • For example, A 64-ounce product costing $8.32 would be calculated in this manner: Unit price = $8.32 / 64 = $0.13, or = 13 cents an ounce

  10. Wise Online Buying Activities

  11. Warranties • Full or limited express warranties, usually written • Implied Warranty Of Title indicates the seller has the right to sell the product • Implied Warranty Of Merchantability guarantees the product is fit for its ordinary use • USED-CAR WARRANTIES: disclosures must describe warranty, if any (otherwise car sold “as is”) • NEW-CAR WARRANTIES include basic parts, power train, and corrosion coverage • SERVICE CONTRACTS: known as extended “warranties” but are not warranties; for a fee they provide coverage for expensive repairs but have exclusions 8-11

  12. Major Consumer Purchases: Buying Motor Vehicles LO8-2: Implement a process for making consumer purchases. • PHASE 1: PRESHOPPING ACTIVITIES • Problem identification • Information gathering • Personal contacts • Business organizations • Media sources (television, websites) • Independent testing organizations (Consumer Reports) • Government agencies • Online Sources (Autotrader) 8-12

  13. Phase 2: Evaluating Alternatives • Ask yourself: • Can I delay the purchase or do without item? • Should I pay cash or buy on credit? • Which brands should I consider? • How do price, quality, and service differ among stores? • Is it possible to rent item instead of buying? • Comparison shopping • Selecting vehicle options (mechanical devices, convenience and aesthetic options) • Comparing used vehicles (CarMax superstore) 8-13

  14. Phase 2: Evaluating Alternatives(continued) • Leasing A Motor Vehicle • Leasing is a contract to use an automobile for a monthly payment • Advantages • Lower payments than buying; security deposit smaller than down payment for buying • Lease agreement provides business records • Usually obtain a more expensive vehicle • Drawbacks • No ownership interest; possible charge for extra miles • Requirements similar to qualifying for credit • Know the capitalized cost of the lease, the money factor, the monthly payment, number of payments, and the residual value 8-14

  15. Phase 3:Determining Purchase Price • Price negotiation for new and used cars • Know necessary information about the product • Deal with a person of authority to give you a lower price or additional features • Used-cars: current price information in newspaper ads, Kelley Blue Book, or Edmund's Used Car Prices • New cars: Set-price dealers or car-buying services 8-15

  16. Phase 3:Determining Purchase Price(continued) • Compare financing alternatives • Variety of lenders and some lenders may pre-approve you for a certain loan amount • Avoid being upside-down or having negative equity in your car • Look for rebates or low-interest financing • Consider the APR (true cost of credit) • Check auto financing information at Bankrate 8-16

  17. Example: Upside Down • A $26,000 vehicle is purchased with an initial loan of $18,000. After a period of time, the vehicle may only be worth $12,000 while you still owe $14,000. • To avoid this situation, make a large down payment, have a short-term loan (less than five years), and pay off the loan faster than the decline in value of the vehicle.

  18. Phase 4: Post-purchase Activities • Lemon Laws (Lemon Law America) • Automobile operation costs • Fixed Ownership Costs (depreciation is largest) • Variable Operating Costs • Motor Vehicle Maintenance • Regular care minimizes major repairs • Automobile servicing sources • Car dealers, auto repair shops, mass merchandise retailers, specialty shops 8-18

  19. Research-Based Approach for Purchasing a Motor Vehicle 8-19

  20. Resolving Consumer Complaints LO8-3: Determine steps to take to resolve consumer problems. • Step 1: Return to place of purchase • Step 2: Email company or obtain its consumer hotline number by calling 1-800-555-1212 • Step 3: Obtain assistance from a consumer agency • Better Business Bureau • Mediation uses a third party to negotiate (nonbinding) • Arbitration uses a third party to make the decision (binding) • Federal and State government agencies • Step 4: Legal action 8-20

  21. Resolving Consumer Complaints(continued) 8-21

  22. Legal Options for Consumers LO8-4: Evaluate legal alternatives available to consumers. • Small claims court • Class-action suits • Using a lawyer • Other legal alternatives • Legal aid society • Prepaid legal services • Personal Consumer Protection • Do business with reputable companies; Sign contracts you understand; Be cautious of exaggerated offers; Compare buying on credit versus paying cash; Avoid rushing to get a deal 8-22

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