Chapter 12 - Household Purchases

Question 1

Explain the term ‘cash purchases’.

Answer 1

1. Customer owns goods immediately
2. Payment passes to sell.er immediately
3. You do not build up any debts

Question 2

Explain the term ‘credit purchases’.

Answer 2

1. Customer receives goods immediately
2. Payment passes to seller at a later date
3. Electricity and telephone bills are paid this way

Question 3

Explain the term ‘credit cards/store cards’

Answer 3

1. Customer has 28 days before they have to pay the balance
2. Customer receives the goods immediately
3. Can lead to impulse buying

Question 4

Explain ‘renting/leasing’.

Answer 4

1. Customer never owns the good
2. May end up paying more in the long run then the good is worth
3. Don’t have spend large amounts of money buying goods you only need for a short period of time

Question 5

Explain ‘higher purchase’.

Answer 5

1. Involves 3 parties - buyer, seller & financial institution.
2. Customer does not own goods until the final payment is made.
3. Financial institution pays the seller in full for the asset.
4. Buyer pays the financial institution in regular payments for an agreed period of time
5. Buyer ends up paying more then if they had paid the seller for the asset as they were also being charged interest.

Question 6

What are the requirements of hire purchase?

Answer 6

1. Cash price of good
2. Total cost of good when using hire purchase
3. Number of payments and the amount of each payment
4. How often the payments have to be made
5. If a deposit or end payment is required
6. The APR of interest

Question 7

What are the rights of a purchaser under higher purchase?

Answer 7

1. To receive a copy of the HP agreement showing cash price, HP price, APR, number of instalments & amount of each instalment.
2. To be able to return goods to company if instalments can’t be paid.
3. If more then 1/3 of HP is paid the company cants take goods back unless the court gives them permission.

Question 8

Name 3 ways to pay for goods and services.

Answer 8

1. Cash Purchase
2. Credit Purchase
3. Hire Purchase