8 | 1 Chapter 4: Consumer Purchasing Section 4.1 Consumer Purchasing Today’s Agenda: 1.What influences your buying decisions? 2.Examine a research-based approach to buying 3.Strategies for making wise buying decisions Goal: Learning how to use various techniques to get the best value for your money!
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Chapter 4: Consumer Purchasing
Section 4.1 Consumer Purchasing
Today’s Agenda:1. What influences your buying decisions?
2. Examine a research-based approach to buying
3. Strategies for making wise buying decisions
Goal:Learning how to use various techniques to get the best
value for your money!
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Economic Factors
Social Factors
Personal Factors
Factors that Influence Buying Decisions
Figure 4.1
How might each of these factors affect
our purchases?
Why do we buy what we buy?
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Convenience
Cash vs. Credit
Price vs. Quality
Online Purchasing
Forces us to think about priorities, consequences.
Unless money is unlimited,
Buying decisions involve trade-offs!How do
You shop?
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Phase 1: Before You Shop, Ask…
What do I really need?
What information will help me?
Do I know enough to make an informed decision?
What does pre-shopping research involve?
A Research-Based Approach
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1. Identify Your Needs
–WANTS vs. NEEDS Have an open mind; think of ALL your options
2. Gather Information
– Brands? Costs? Options/Features? Consequences
– Where can you find reliable information?
– Do you spend enough time? Too much time?
3. Know the Marketplace
Knowledge = POWER
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Phase 2: Weighing the Alternatives
There are usually lots of options! Consider all of them!
1. Compare Features (what is important to you?)
–Design? Quality? Performance? LOOK?
2. Compare Prices
– Does Price = Quality?
3. Compare Vendors– Go to different stores, look online
– When is this especially useful?
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Phase 3: Making the Purchase
1. Negotiate the Price (if possible!)
2. Decide on Credit or Cash
– Costs?
– Benefits?
3. Know the Real Price– Does the listed price include everything?
Phase 4: After the Purchase
4. Rethink your purchase
5. Did you make the right choice? Why evaluate?
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1.Time Your Purchases
Law of supply and demand
2. Store Selection
Benefits vs. Limitations
3. Compare Brands
Generic vs. National Brands?
Smart Buying Strategies
Can you tell the difference?
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Impulse Buying can ruin a budget!
Try a 2-day cool-down period
Pg. 100
4. Examine Labels
Cool Advertising
5. Compare Prices
Unit Pricing
Is bigger always better?
$45
$9
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Unit = VolumeUnit = Weight
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Supplement to Chapter 4
Purchasing a Vehicle
Today’s Agenda: Learn what it means to “LEASE” a vehicle
Goals: Understand how a lease works & how it compares to
buying a vehicle
Recognize the factors that affect the cost of a lease
Identify the advantages / disadvantages of leasing
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Review Our Car “Purchase”
• Terminology: – The 3 prices you found– Consumer reviews, fuel economy, depreciation
MSRP TMV
Invoice Price
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What happens to the value of my car over time?
The value of my car at any given point in time is it’s “RESIDUAL VALUE”
MSRP = $18,350
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Let’s BUY it!2011 Mazda3 i Sport
Advertised Price: $16,338
Add tax, license, registration:
= $18,000
Borrow $18,000 over 3 years @ 7%
$555.80
Guess I need a loan!
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$233
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What does it mean to“LEASE” this car for 3 years?
I will “rent” this car…
it will depreciate as I drive it.
Value after 3 years?
When my lease is up, I simply return vehicle to dealership.
What is my monthly cost to lease this vehicle for 3 years?
$233
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Let’s look at the “BUY” option again… After 3 years I
have paid $18,000
and
the car is
MINE.
After7 years,Residual value is
$3000
If I sell for $3000 after 7 years, what was my overall cost?
$18,000 paid - $3,000 received = $15,000(or $178 per month)
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LEASING…The good and the bad:
Advantages:
Lower monthly payment
Save on sales tax
Always under warranty
Afford nicer car
Disadvantages:
Restrictions on mileage
No equity (ownership)
Charges for excess “wear”
Always a payment!
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CONCLUSIONS…
• Leasing can be confusing!• Cost to lease depends on a car’s depreciation• Leasing is wise in certain situations…
– Decide if it is right for YOU!
Long-Term: Buying is Cheaper
Middle (4-5 yrs): Even
Short-Term: Leasing Wins
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• Information = Power
• Smart shoppers do their homework!
• Why gather information before interacting with sellers????
• Remember: sellers are highly skilled; not objective
• The key to successful negotiating: enough knowledge and accurate information
Shopping for a Vehicle
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1. Pre-Shopping Thoughts:• Determine your affordability (look at budget)
• Think about your choices: buy used; buy new; lease; bus! (what works with your budget?)
2. Start Research• Investigate makes, models (talk to friends, read
reviews)
• Narrow down choices based on what is important to YOU:
=> Safety, features, fuel efficiency, warranty?
Where to Begin…
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• Examine your financing options
Remember: If you are taking out a car loan, what 2 factors will affect your monthly payments?
1. Interest rate:– Check with local bank/credit union
– Know your credit score!
– Is manufacturer or dealer offering any special financing deals?
2. Term: how many months to pay off loan– Trend: longer-term financing--what does this do?
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• Other things to research:
– Available rebates / incentives?
– Reviews?
– Comparable vehicles / feature comparisons?
– Depreciation?
– Warranty?
• Do you have a vehicle to trade-in?
(Find out its value BEFORE talking to salesperson)
Tips on Negotiating your trade-in:
•Treat the purchase and trade-in as separate transactions
•Come to agreement on purchase price of new car
•Then, negotiate a price for your trade-in
•Sell the vehicle yourself if they come in too low
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• Get Organized? 3 Basic Options to Consider:
Sheet One: New Car Buy• Negotiate one thing at a time.
• With many other variables (new car price, trade-in, rebates, options, interest rate) the dealer can APPEAR to be cooperative on one aspect and make up the difference elsewhere!
– MSRP vs. Invoice Price vs. TMV
– What do each of these mean?
Know exactly how themonthly figure was
calculated!
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Sheet Two: Used Car Buy• Remember: Late model used car with
low mileage = practically “new” !
• Research pricing: www.edmunds.com
- Trade-In vs. Dealer Retail vs. Private Party
- What do each of these mean?
• Most research, including inventory searches, can be done online / in newspapers
Sheet Three: Leasing a Vehicle• What is an automobile lease? Read handout