8

Question 1

Need/Want

Answer 1

A need is something thought to be a necessity.
A want is unnecessary but desired.

Question 2

preshopping research

Answer 2

Gathering information before actually beginning to interact with sellers.

Question 3

manufacturer’s suggested retail price (MSRP)

Answer 3

The retail price set by the manufacturer and posted on the federally required side window sticker.

Question 4

dealer invoice price

Answer 4

The amount the automaker charges the dealership for new vehicles at the time the dealer buys them; it does not reflect some discounts that the dealer gets.

Question 5

Comparison shopping

Answer 5

Process of comparing products or services to find the best buy.

Question 6

best buy

Answer 6

Product or service that, in the buyer’s opinion, represents acceptable quality at a fair or low price for that quality level.

Question 7

The Internet is a superlative source of information. Begin by checking out

Answer 7

The Internet is a superlative source of information. Begin by checking out ConsumerReports.com, Kiplinger.com, and Edmunds.com. Then go to the vehicle companies themselves, such as Toyota.com, Ford.com, and Honda.com.

Question 8

Here is a list of criteria to use when comparison shopping on how to pick the safest vehicle:

Answer 8

Vehicle size and weight.
Forward-collision warning (FCW).
Automatic Emergency Braking (AEB).
V2Vcrash-avoidance system.
Extra airbags.
Stability control.
Adaptive cruise control (ACC).
Blind-spot warning.
Backup visibility.
Automatic high beams.
Lane departure warning (LDW).
Pothole-Detection Technology.
Parking-assist system.
Self-driving cars.
Safety Tests.
Recalls on used vehicles.

Question 9

window shopping

Answer 9

This is the activity of looking at the goods displayed in shop windows, especially without intending to buy anything.

Question 10

upside down

Answer 10

A situation where the owner of a financed asset owes more than it is worth, thus creating negative equity.

Question 11

bump-up scam

Answer 11

Auto dealers sometimes tell people that their credit score is not the best and, as a result, they have to pay a higher interest rate.

Question 12

balloon automobile loan

Answer 12

is one that requires a larger-than-usual one-time payment at the end of the term.

Question 13

When the final payment is due, perhaps when one still owes one, two, or even several thousand dollars, the borrower has five options:

Answer 13

Hand over the cash sum stipulated in your agreement and keep the vehicle.

Return the vehicle to the lender to pay for the balloon payment (assuming its value satisfies the amount due).

Refinance with the lender or borrow from another source.

Sell the motor vehicle and pay the balloon payment with the proceeds (assuming the vehicle will sell for an amount that is high enough).

Trade the vehicle in on a replacement vehicle, and roll over the balloon amount due into another auto loan for the newer vehicle.

Question 14

subprime loans

Answer 14

These are a type of loan approved for people with substandard credit scores or limited credit histories.

Question 15

With a rebate…

Answer 15

…the seller refunds a portion of the purchase price of the product either as a direct payment or a credit against the purchase (sometimes through a gift card).

Question 16

lease

Answer 16

In this context, a contract specifying both tenant and landlord legal responsibilities

Question 17

There are a number of problems to avoid when leasing:

Answer 17

Avoid paying money up front.
Avoid paying maintenance on leases that are too long.
Avoid paying for driving extra miles.
Avoid paying “full market price” for repairs.

Question 18

gross capitalized cost (gross cap cost)

Answer 18

Includes vehicle price plus the cost of any extra features such as insurance or maintenance agreements.

Question 19

Capitalized cost reductions (cap cost reductions)

Answer 19

are monies paid on the lease at its inception, including any down payment, trade-in value, or rebate.

Question 20

adjusted capitalized cost (adjusted cap cost)

Answer 20

Subtracting the capitalized cost reductions from the gross capitalized cost.

Question 21

residual value

Answer 21

Projected value of a leased asset at the end of the lease time period.

Question 22

The money factor (or lease rate or lease factor)

Answer 22

measures the rent charge portion of your payment.

Question 23

In an open-end lease…

Answer 23

…, you must pay any difference between the projected residual value of the vehicle and its actual market value at the end of the lease period.

Question 24

depreciates

Answer 24

New vehicles and low-mileage used cars go down in value very quickly after purchase, often as much as 20 percent after leaving the dealer’s lot.

Question 25

closed-end lease (also called a walkaway lease)

Answer 25

Agreement in which the lessee pays no charge if the end-of-lease market value of the vehicle is lower than the originally projected residual value.

Question 26

An acquisition fee

Answer 26

is either paid in cash or included in the gross capitalization cost. It pays for a credit report, application fee, and other paperwork.

Question 27

A disposition fee

Answer 27

is assessed when you turn in the vehicle at the end of the lease and the lessor must prepare it for resale.

Question 28

An early termination charge

Answer 28

may also be levied if you decide to end the lease prematurely.

Question 29

warranty

Answer 29

A type of guarantee that a manufacturer or similar party makes regarding the condition of its product.

Question 30

implied warranty

Answer 30

the product sold is warranted to be suitable for sale

Question 31

implied warranty for fitness for a particular purpose

Answer 31

Here the seller (or provider or manufacturer) knows the buyer’s particular use and the buyer relies on the seller’s expertise or judgment in choosing the product.

Question 32

as is

Answer 32

Way for the seller to get around legal requirements for warranties; the buyer takes all risk of nonperformance or other problems despite any salesperson’s verbal assurances.

Question 33

limited warranty

Answer 33

Any warranty that offers less protection than the three conditions for full warranty.

Question 34

Negotiating

Answer 34

Process of discussing actual terms of agreement with a seller, usually on higher-priced items.

Question 35

dealer holdback

Answer 35

A percentage of the total MSRP that the manufacturer holds and then gives back to the dealer, often at the end of the year or quarter.

Question 36

high-balling

Answer 36

Sales tactic in which a dealer offers a trade-in allowance that is much higher than the vehicle is worth.

Question 37

decision-making matrix

Answer 37

A system that allows one to visually and mathematically weigh the decision you are about to make.

Question 38

low-balling

Answer 38

A sales tactic where the seller quotes an artificially low price to obtain a verbal agreement from a buyer and then attempts to raise the negotiated price when it comes time to finalize the written contract.

Question 39

buyer’s order

Answer 39

Written offer that names a specific vehicle and all charges; only sign such offers after the salesperson and sales manager have signed first.

Question 40

Buyer’s remorse

Answer 40

is a myth pertaining to the buyer’s supposed legal right to change his or her mind and return a vehicle after signing a purchase contract

Question 41

cooling-off rule

Answer 41

A Federal Trade Commission rule that gives consumers three days to cancel a contract of $25 or more after signing it for a sale made anywhere other than a seller’s normal place of business.

Question 42

Mediation

Answer 42

is a procedure in which a neutral third party works with the parties involved in the dispute to arrive at a mutually agreeable solution.

Question 43

In arbitration…

Answer 43

… a neutral third party hears (or reads) the claims made and the positions taken by the parties to the dispute and then issues a ruling that may or may not be binding on one or both parties.

Question 44

lemon laws

Answer 44

State laws that provide guidelines for arbitrators to use to order a dealer’s buyback of a “lemon” as defined under the law—commonly a car that has been in the shop four or more times to fix the same problem.

Question 45

redress

Answer 45

Process of righting a wrong.