Ch.8: Consumer Purchasing Strategies and Legal Protection Flashcards

1
Q

What are five economic factors that impact consumer buying activities?

A
  • Inflation
  • Interest rates
  • Tax rates
  • Government regulations
  • Product safety
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2
Q

What are six social factors that impact consumer buying activities?

A
  • Lifestyle
  • Interests
  • Hobbies
  • Peer group
  • Culture
  • Advertising media
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3
Q

What are seven personal factors that impact consumer buying activities?

A
  • Gender
  • Age
  • Occupation
  • Income
  • Education
  • Marital status
  • Family size
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4
Q

What is the difference between comparison shopping and impulse buying?

A

Comparison shopping is planned shopping while impulse buying is unplanned shopping.

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5
Q

What does it mean to time your purchases?

A

It means that you wait for when a certain item goes on sale each year. Ex. Buying holiday items in late December and early January.

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6
Q

What are some strategies to help avoid unneeded purchases?

A
  • Don’t buy an item right away. Delay it to consider its value
  • Review delayed purchases in a month to decide if the urge still exists/money is still available.
  • Use websites and apps to compare prices and obtain coupons.
  • Calculate how many hours you need to work to pay for an item.
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7
Q

What is a cooperative?

A

A nonprofit organization in which members save money on various products and services. Ex. Food cooperatives allow members to buy in bulk.

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8
Q

What should you be aware of when buying at dollar stores?

A
  • Expired food products
  • “Look alikes” posing as famous brands
  • Items that are more expensive than sale price as other stores
  • Unsafe imported items (ex. extension cords, toys, vitamins, etc)
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9
Q

According to federal law, what must show up on food labels?

A
  • Company name and address
  • Ingredients
  • Nutrients
  • Food allergy warnings
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10
Q

What is open dating?

A

The date that describes the freshness or shelf life of a perishable product. Ex. Use before May 9th

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11
Q

True or False. Expiration dates relate to quality rather than safety.

A

True. Items that are past the sell by date are likely still safe for consumption. Canned or packaged foods will usually stay safe beyond the expiration date.

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12
Q

What is unit pricing? How do you calculate it?

A

The standard unit of measurement to compare the prices of packages of different sizes. It is calculated by dividing the price by the number of units of measurement (ex. pounds, gallons, number of sheets, etc.)

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13
Q

What is a rebate?

A

A partial refund of the price of a product

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14
Q

What are five things to remember when comparing prices?

A
  • More store convenience (location, hours, sales staff) usually means higher prices
  • Ready to use products have higher prices
  • Large packages are usually the best to buy. Compare unit price
  • “Sale” may not always mean saving money
  • Many websites/apps are available with prices, coupons, and rebates.
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15
Q

What is a warranty?

A

A written guarantee from manufacturer/distributor that specifies the conditions under which product can be returned, replaced, or repaired.

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16
Q

What are the two forms of an express warranty?

A

Full warranty and limited warranty

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17
Q

What is a full warranty?

A

Warranty states that a defective product can be fixed or replaced during a reasonable amount of time.

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18
Q

What is a limited warranty?

A

Warranty that covers only certain aspects of a product or requires buyer to incur part of the cost for shipping or repairs.

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19
Q

What is an implied warranty?

A

Warranty that covers a product’s intended use or other basic understandings that are not in writing. Ex. A implied warranty of merchantability gurantees that the product is fit for the ordinary uses that it is intended for.

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20
Q

What does the FTC require used car businesses to do?

A

They require that businesses who sell used cards to put a buyer’s guide sticker in the windows of the cars for sale. The sticker must state whether or not the car comes with a warranty and, if so, what protection the dealer will provide.

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21
Q

What does the Buyer’s Guide from the FTC encourage you to do?

A

Have the used car inspected by the mechanic and get all promises in writing.

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22
Q

What are the main conditions of a new car warranty?

A
  • Coverage of basic parts against defects
  • Power train coverage for engine, transmission, and drivetrain
  • Corrosion warranty
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23
Q

What other conditions are included in a new car warranty?

A

Whether the warranty is transferable to other owners of the car and details about the charges

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24
Q

What are service contracts?

A

Agreements between a business and a consumer to cover the repair costs of a product. They protect the buyer from high costs resulting from certain repairs and other losses.

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25
Q

What are the first two things you should do when buying a complex product?

A

Identify the problem (ex. I need transportation) and gather buying information.

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26
Q

What are five common information sources for buying info?

A
  • Personal contacts (ex. family/friends)
  • Business Organizations
  • Media sources (ex. televisions, radio, newspapers, magazines, etc.)
  • Independent testing organizations (ex. Consumer Union)
  • Government agencies
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27
Q

What is the next thing you should do after identifying the problem and gathering info?

A

Evaluate alternatives. Be sure to ask yourself: is it possible to delay the purchase or do without the item? What method should I use to pay for it? Can I rent the item instead of buying?

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28
Q

In what situations can comparison shopping be beneficial?

A
  • Buying expensive/complex items
  • Buying items you purchase often
  • The process can be done easily (ex. with advertisements, online, or in a catalog)
  • Different sellers offer different prices and services
  • Product quality or prices vary greatly
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29
Q

What three categories can optional equipment for cars be viewed as?

A
  • Mechanical devices (things that improve performance like larger engines)
  • Convenience options (things that provide convenience like sound systems)
  • Aesthetic features (things that add to the vehicle’s visual appeal like metallic paint)
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30
Q

What are four high-tech safety features that newer car models may have?

A
  • Forward Collision Warning
  • Automatic Emergency Braking
  • Blind spot warning tech
  • Adaptive cruise control
  • Lane keep assist and lane departure warning
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31
Q

What are some common sources for buying a used car?

A
  • New car dealers
  • Used car dealers
  • Individuals selling their own cars
  • Auctions and dealers that sell previously owned vehicles from businesses, auto rental companies, and gov agencies.
  • Used car superstores
  • Online used car businesses
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32
Q

What are CPO vehicles?

A

Nearly new cars with original manufacturer’s guarantee of quality. Is a higher price than other vehicles because of rigorous inspection and repair processes.

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33
Q

How can you avoid surprises when purchasing a used car?

A

Have a mechanic of your choice check the car to estimate needed repair costs.

34
Q

What is leasing?

A

It is a contractual agreement with monthly payments for the use of an automobile for a set period of time.

35
Q

What are four advantages of leasing?

A
  1. Only small cash outflow will required for security deposit while buying on credit will require a large down payment
  2. Monthly lease payments are often lower than monthly financing payments
  3. Lease agreement provides detailed records for business purposes
  4. You can obtain a new vehicle more often
36
Q

What are three drawbacks of leasing?

A
  1. No ownership interest on the vehicle
  2. You need to meet certain requirements like if you were applying for credit
  3. There may be additional costs incurred for extra mileage, certain repairs, returning the car early, or moving to another state.
37
Q

What does it mean to know the “true cost” of a leased car?

A

It means that you know the capitalized cost, money factor, the monthly payments and the number of payments, and the residual value.

38
Q

What is the capitalized cost of a vehicle?

A

The price of the vehicle

39
Q

What is the money factor?

A

The interest rate being paid on the capitalized cost

40
Q

What is the residual value?

A

Expected value of the vehicle at the end of the lease

41
Q

At the end of the lease, if the market value is greater than the residual value what should you do with the vehicle?

A

Sell it for a profit

42
Q

At the end of the lease, if the market value is less than the residual value what should you do with the vehicle?

A

Give the vehicle back to the leasing company

43
Q

What are some common leasing pitfalls to enjoy?

A
  • Not knowing the total cost of the agreement, including cost of vehicle
  • Making larger up-front payment than required or paying unnecessary add-on costs
  • Negotiating monthly payment rather than capitalized cost of vehicle
  • Not having the value of any trade in vehicle reflected in the lease

-Signing a contract you don’t understand

44
Q

What are two factors for effective negotiation?

A
  1. Having all necessary information about product and buying situation
  2. Dealing with someone who has the authority to give you a lower price or additional features (ex. business owner or store manager)
45
Q

What are some factors that influence the price of a used car?

A
  • Number of vehicle miles
  • Features
  • Options
  • Vehicle Condition
  • Demand for model
46
Q

What is the sticker price of a vehicle?

A

It is the suggested retail price printed on a vehicle label.

47
Q

What is the dealer’s cost of a vehicle?

A

It is an amount less than the sticker price.

48
Q

True or False. The difference between the sticker price and the dealer’s cost is not available for negotiation.

A

False. You can negotiate a price of a car within this range. The size of this range is larger for luxury vehicles but smaller for cheaper vehicles.

49
Q

How can you prevent confusion in determining the true price of a new car?

A

Do not mention a trade-in vehicle until settling on the cost of the new car. Then, ask how much the dealer is willing to pay for your old car. If the offer price is not acceptable, sell the old car on your own.

50
Q

What are some things you can do to avoid scams from online used car sellers?

A
  • Research seller’s background and reputation
  • Do title check to confirm seller’s name and make sure car isn’t stolen.
  • Do an online VIN search for price history info
  • Check for recalls and safety record of the vehicle
  • Don’t buy a car if you’re not allowed to have a mechanic inspect it
51
Q

What are six sales techniques used in the past?

A
  • Lowballing (quoting a very low price that increases when add on costs are included)
  • Highballing (offering high amount for trade in vehicle which is then made up by increasing price of new car)
  • Be sure to ask how many months when asked “how much can you afford per month?”
  • Never leave a deposit unless you are willing to buy or are willing to lose that amount
  • When they say “Your price is only ____ above our cost”, beware that many hidden costs may have been added to get the dealer’s cost
  • Beware of sales agreements with preprinted amounts. Cross out numbers that are not appropriate
52
Q

When are the best days to buy a new car according to research?

A

Sunday and Tuesday. Thursday is the worst day.

53
Q

Where can you get an auto loan?

A

They are available from banks, credit unions, consumer finance companies, and businesses.

54
Q

What does it mean when you have upside down or negative equity from a car?

A

It means that the value of the car is less than the amount you still owe

55
Q

How can you avoid negative equity?

A
  • Make a large down payment
  • Have a short term loan (less than five years)
  • Pay off loan faster than the decline in value of the vehicle
56
Q

When faced with repairs not covered by a warranty, what should a person do?

A

Investigate, evaluate, and negotiate various service options

57
Q

What are lemon laws? When do they apply?

A
  • Laws that require a vehicle refund after the owner has made repeated attempts to obtain a resolution.
  • Apply when four attempts have been made to get same problem corrected or when vehicle has been out of service for more than 30 days within 12 months of purchase
58
Q

Automobile expenses will vary based on ________ and _________

A

Size of automobile and number of miles you drive

59
Q

Automobile costs involve what two categories?

A

Fixed Ownership Costs and Variable Operating Costs

60
Q

What are five fixed ownership costs?

A
  • Depreciation (loss in vehicle due to time and use).
  • Interest on auto loan
  • Insurance
  • License, registration, taxes, and fees
61
Q

What are four variable operating costs?

A
  • Gasoline/oil
  • Tires
  • Maintenance/repairs
  • Parking and tolls
62
Q

To get taxes deducted for travel, what does the Internal Revenue Service require you to do?

A

You must record info about mileage, locations, dates, and purposes of trips. Keep records of regular operating expenses and infrequent expenses

63
Q

What are some ways you can extend vehicle life?

A
  • Get regular oil changes every 3,000 - 7,500 miles
  • Check fluids (brake, power steering, transmission)
  • Get tune-up every 10,000 - 50,000 miles
  • Flush radiator and service transmission every 25,000 miles
64
Q

True or False. The cost of vehicle servicing at car dealers is usually higher than other repair options.

A

True

65
Q

________ offer brakes, tires, transmission servicing, and oil changes at a reasonable price with fast service

A

Specialty shops

66
Q

What are four common frauds?

A
  • Disaster-related fraud: Scams that collect money to “donate” to victims after tragedies/natural disasters
  • Credit Repair: Companies that offer to clean up credit history
  • The “Yes” scam: Scammer asks legitimate question to record you saying yes. The victim is later billed for a “valid” transaction.
  • Scholarship/Financial Aid Scams: Organization says that guarantees a scholarship or say that you have been selected by an “national foundation”.
67
Q

How can you minimize consumer problems?

A
  • Obtain recommendations from friends, family, and online reviews
  • Verify company affiliations, certifications, and licenses
  • Understand sales terms, return policies, and warranties
68
Q

What is the first step you should do when resolving a costumer complaint?

A

Go or call the original sales location and provide them with a detailed explanation and an action you desire.

69
Q

If the first step doesn’t work, what should you do next to resolve a complaint?

A

Send an email to the company headquarters that includes a detailed explanation of the issue and your desired action.

70
Q

What’s the next step you can take if your complaint is not resolved in the first two steps?

A

You can a mediator or an arbitrator to act as a third party person to settle the dispute between a customer and a company.

71
Q

What is the difference between a mediator and an arbitrator?

A

Mediation is nonbinding process that tries to help resolve conflict through discussion and negotiations. Arbitration is a legally binding process in which both parties present their case to an arbitrator.

72
Q

What’s the last step you can take if a complaint has not yet been resolved?

A

Take legal action in small claims court or class action suits.

73
Q

What is a small claims court?

A

A court that settles legal differences below a set amount and allows litigants to choose whether or not they want a lawyer.

74
Q

What is a class action suit?

A

A legal action taken by a few individuals on behalf of all people who suffered the same alleged injustice. This group is represented by a lawyer or group of lawyers.

75
Q

What can a person do if a large number of people choose not to participate in a class action suit?

A

The person may file an individual lawsuit

76
Q

What are some examples of matters that would require a lawyer?

A
  • Writing a will
  • Settling a real estate purchase
  • Suing for injury damages
77
Q

What kinds of questions should you ask when choosing a lawyer?

A
  • Is the lawyer experienced in your type of case?
  • Will you be charged on a flat fee basis, hourly rate, or on a contingency basis?
  • Is there a fee for an initial consultation?
  • How and when will you be required to make payment for services?
78
Q

What is a legal aid society?

A

A network of publicly supported community law offices providing legal assistance to people who cannot afford their own attorney.

79
Q

What are prepaid legal services?

A

Services that provide unlimited or reduced-fee legal assistance for a set fee. The more complicated the matter, the higher the price will be.

80
Q

What are five actions to take to avoid falling victim to deceptive business practices?

A
  • Do business with reputable companies with consistent customer satisfaction
  • Understand contracts and other documents you sign
  • Beware of websites that don’t end in .com, .gov, or. org
  • Compare credit card costs with paying cash
  • Avoid impulse buying
81
Q

What are two good sources to look for fair used car prices?

A

Kelly Blue Book and Edmund’s Used Car Prices