Chapter 8: Vehicle and Other Major Purchases Garman/Forgue Personal Finance Ninth Edition PPT slide...

Chapter 8:Vehicle and Other Major Purchases

Garman/Forgue

Personal FinanceNinth Edition

PPT slide program prepared by Amy Forgue and Ray Forgue.

Copyright ©Houghton Mifflin Company. All rights reserved. 8 - 2

Learning Objectives

1. Explain the three steps in the planned buying process that occur prior to interacting with sellers.

2. Describe the five aspects of major purchases that require comparison shopping.


Learning Objectives

3. Negotiate and decide effective when making major purchases.

4. Evaluate your purchase decisions and, if necessary, effectively seek redress.


Do Your Homework

• What do you really want?– Need

– Want

– Impulse Buying

– Generic Products


How To Buy Smart

• Become an expert

• Preshopping Research: Gathering information before actually beginning to interact with sellers.


How To Buy Smart

• What price should you expect to pay?– Manufacturer’s Suggested Retail Price

(or MSRP): The suggested initial asking price.

– Dealer Sticker Price: Includes additional charges tacked on by the dealer.


How To Buy Smart

• What is a fair interest rate?

• Loan preapproval


How To Buy Smart

• Is a rebate available?

• Rebate: A partial refund of a purchase price offered as an inducement to buy.


How To Buy Smart

• What is my trade-in worth?

• Can I afford it?


How To Buy Smart

• Use comparison shopping to find the best buy.– Comparison Shopping

– Best Buy

• Compare prices.


How To Buy Smart

• Compare financing options.

• Consider leasing instead of buying.– Leasing: Renting a product while the

ownership title remains with the lease grantor.


Leasing Terminology

• Open-end lease

• Closed-end lease (or walkaway lease)


Leasing Terminology

• Additional leasing fees:– Disposition fee

– Early termination charge

– Early termination payoff


Compare Warranties

• Warranty

• Implied Warranty

• Express Warranties

• Full Warranty

• Extended warranties are overpriced!


Negotiation

• Negotiating (or haggling)

• Negotiate effectively and decide at home.

• Successful negotiators are armed with information.


Negotiation

• Negotiate your price.– New-Vehicle Buying Service

– Professional Shoppers

– Invoice Price (or Seller’s Cost)

– Dealer Holdback (or Dealer Rebate)


Negotiation

• Negotiate your interest rate.– Get a firm price for the vehicle.

– Negotiate the lowest possible APR through the dealer. Borrow elsewhere if the rate is lower.

– Obtain a firm commitment on a trade-in allowance. Sell the vehicle yourself if the allowance is too low.


Negotiation

• Negotiate your trade-in.– High-Balling


Make the Decision

• Finalizing a car deal.– Low-balling

– Buyer’s order


Evaluate Your Decision

• Redress

• Alternative Dispute Resolution Programs

• Mediation

• Lemon Laws

• Small-Claims Court


The Top 3 Financial Missteps In Big-Ticket Purchases

People slip up in when they do the following:

1. Rely upon the seller as their source of information for price, financial terms, and trade-in value.

2. Tell a seller what they can afford to pay so the seller can avoid disclosing his or her lowest price.

3. Don’t complain when products fail to perform as expected.


Good Money Habits in Vehicle and Other Major Purchases

• Think through all of your major purchases using the planned buying process.

• When planning to buy vehicles, check repair ratings history in the April issue of Consumer Reports magazine.



• Purchase late-model, high-quality used vehicles and check their ownership history at www.carfax.com and recall history at www.nhtsa.gov.

• Obtain price information from at least three sources and aggressively negotiate prices and financing terms for major purchases.

http://www.nhtsa.gov/



• Never tell a seller what payment you can afford.

• Promptly and firmly seek redress when dissatisfied with purchases or services.

Chapter 8: Vehicle and Other Major Purchases Garman/Forgue Personal Finance Ninth Edition PPT slide...

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