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Chapter 08

Consumer Purchasing Strategies and Legal Protection

McGraw-Hill/Irwin

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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Chapter 8
Learning Objectives

Identify strategies for effective consumer buying.

Implement a process for making consumer purchases.

Identify steps to take to resolve consumer problems.

Evaluate legal alternatives available to consumers.

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Financial Implications of
Purchasing Decisions

Objective 1: Identify strategies for effective consumer buying

FINANCIAL IMPLICATIONS OF CONSUMER DECISIONS

  • 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.

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Financial Implications of
Purchasing Decisions

  • Commonly overlooked trade-offs when buying include… (continued)
  • Selecting brands that may be difficult to service or repair.

  • Ordering by mail or online to save time and money, but return or repair may be difficult.
  • Taking time and effort to comparison shop.

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  • Consumer prices
  • Interest rates
  • Supply/demand
  • Brand name
  • Warranty
  • Product Quality
  • Tax rates
  • Govt. regs.

Economic Factors

  • Lifestyle
  • Culture
  • Attitudes
  • Ads
  • Media/Internet
  • Hobbies
  • Peer group

Social Factors

  • Sex and age
  • Marital status
  • Occupation

Personal Factors

  • Income
  • Education
  • Family size
  • Housing type
  • Ethnic group
  • Religion

Consumer

Buying

Influences

Factors of Consumer Purchases

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Financial Implications of
Purchasing Decisions

PRACTICAL PURCHASING STRATEGIES

Timing purchases

  • Be aware if the price varies with the time of the year

Store selection

  • Choice of retailer depends on location,

price, product

  • Cooperatives -non-profit organization;

members save money

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Financial Implications of
Purchasing Decisions

PRACTICAL PURCHASING STRATEGIES (continued)

Brand Comparison

Comparison shopping of store and national brands; avoid impulse buying (unplanned purchasing)

Label information

Look for information on label and open dating

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Practical Purchasing Strategies

  • Price comparison
  • Unit pricing provides a standard of measurement
  • Coupons (online: coolsavings.com; centsoff.com; couponsurfer.com) and rebates (partial refund)
  • Convenience & ready-to-use products may mean higher prices. Large is not always the best buy, and “Sale” prices vary among stores

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Practical Purchasing Strategies

  • Evaluate warranties
  • Full or limited express warranties, usually written.
  • Warranty of Title-the right to sell the product
  • Implied warranty of merchantability-fit for normal use

  • Service contracts -also called extended “warranties”

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Major Consumer Purchases: Buying Motor Vehicles
-The Process

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Major Consumer Purchases: Buying Motor Vehicles

Objective2: Implement a process for making consumer purchases

Phase 1: Pre-shopping Activities

Problem identification

Information gathering

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Major Consumer Purchases: Buying Motor Vehicles (continued)

Phase 2: Evaluation of Alternatives

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Major Consumer Purchases: Buying Motor Vehicles (continued)

Phase 2: Evaluation of Alternatives (continued)

  • Leasing an automobile
  • lower payments, smaller initial cash outlay
  • no ownership in vehicle
  • maximum # of miles/year; charged for extra miles
  • know the capitalized cost of the lease, the money

factor, the monthly payment, number of payments,

and the residual value

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Major Consumer Purchases: Buying Motor Vehicles (continued)

Phase 3: Determining Purchase 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: Check newspaper ads, Kelly Blue Book (www.kbb.com), www.edmunds.com

  • New cars: Set-price dealers, car-buying services

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Major Consumer Purchases: Buying Motor Vehicles (continued)

Phase 3: Determining Purchase Price (continued)

Compare financing alternatives

  • Variety of lenders-some lenders may pre-approve you

  • Avoid being upside-down or having negative equity in your car

  • Look for rebates or low-interest financing.

  • Consider the APR, total finance charge.
  • Check out www.bankrate.com

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Major Consumer Purchases: Buying Motor Vehicles (continued)

Phase 4: Post-purchase Activities

Lemon Laws

Automobile operation costs

Use the item correctly to have improved performance and fewer repairs

Investigate, evaluate and negotiate a variety of servicing options

Motor Vehicle Maintenance

Operation costs; fixed and variable expenses

Automobile servicing sources; dealers, service stations, garages, Wal-Mart, etc

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Resolving Consumer Complaints

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Resolving Consumer Complaints

Objective 3: Identify steps to take to resolve consumer problems

Step 1: Return to place of purchase

Step 2: Contact the company’s main office @ 1-800-555-1212 to get company hotline

Step 3: Obtain assistance from a consumer agency

  • BBB provides pre-purchase information
  • Mediation - third party negotiates (nonbinding)
  • Arbitration - decision is binding
  • State consumer protection office or agency
  • Federal agencies - see Appendix B in text

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Legal Options for Consumers

Objective 4: Evaluate the legal alternatives available to consumers

  • Step 4: Take Legal Action
  • Small claims court
  • Class action suits
  • Using a lawyer
  • Other legal alternatives
  • Legal aid society
  • Prepaid legal services
  • Personal Consumer Protection
  • Follow common sense guidelines on dealing with reputable companies, signing contracts, exaggerated offers, credit vs. cash purchase and rushing to get a deal

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