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Consumer Purchasing and Legal Protection

VIEWS: 4 PAGES: 69

									                                                                   1


CHAPTER 6
 Consumer Purchasing Strategies
 and Wise Buying of Motor Vehicles

        Or
        “I’d Like Some More Things, Please!”


   Microsoft Chairman Bill Gates told CNBC that he wished he
       were not the richest man in the world. “There is nothing
            good that comes out of that,” he said. (Reuters.com)
                         2


Culture of Consumption


Scandal #6
       Clothes
“Thanking you for the clothes of                         3



your dead people”
 A journalist was on assignment covering cultures
 around the world and specifically, how their cultures
 relate to and think of our culture. His guide in East
 Africa (the affluent part of Central Africa) invited
 him to come see the distribution of the clothes from
 the dead Americans to the locals. When the
 journalist asked the guide why the locals thought the
 clothes were from dead Americans, the guide looked
 at him oddly and said, “Why would a living person
 give away any of their clothes?”
                         4


Culture of Consumption


Scandal #12
         Pets
                                                               5


          A What Therapist?!
     How much does a very busy dog
     therapist charge for six 1-hour
     sessions with you and your dog?
A. $250
B. $500
C. $1,000
D. $1,500
           The correct answer is (D). That is $250 per hour!
                                             Think Viet Nam.
                                                                                 6


How Much is Fido Costing You?
     Speaking of dogs, what is the average
     yearly cost of owning a dog?*
A. Less than $500
B. Between $500 and $1,000
C. Between $1,000 and $1,500
D. Over $1,500
 The correct answer is (D). Well, of course. Just one series of
     therapy sessions cost $1,500! Remember, this is per dog.
 The total for Americans is $52 billion and it is rising quickly.
                             *ASPCA, American   Veterinary Medical Association
                                                 “I can’t get my      7


“Frugal, Frugal, Frugal”                          wife to spend
                                                  any money!”
    Do Not Forget Taxes
       For every $2 spent, you must earn more than $3 –
         maybe up to $4 depending on your income bracket
       “A Dollar Saved is Two Dollars Earned”
           From The Wealthy Barber
    From The Millionaire Next Door
     “How did the wife of a millionaire respond when her husband
     gave her $8 million worth of stock in the company he recently
     took public? She said, “I appreciate this, I really do.” Then
     she smiled, never changing her position at the kitchen table,
     where she continued to cut out twenty-five- and fifty-cent-off
     food coupons from the week’s supply of newspapers, just as
     she had done each week for the past 27 years.”
                                                         8


Speaking of Millionaires…
 “These people cannot be millionaires! They don’t
 look like millionaires, they don’t dress like
 millionaires, they don’t eat like millionaires, they
 don’t act like millionaires – they don’t even have
 millionaire names. Where are the millionaires who
 look like millionaires?”

          Spoken by the Senior Vice-President of a
          trust department of a major bank that had
           commissioned a focus group interview of
                 twenty first-generation millionaires.
                                                                     9


Speaking of Millionaires…
                                                (continued)

    There are over 8 million households in America with
    a net worth of over one million dollars.
   The median age is 57 years old
   Most are married and have not divorced
   More than 80% are first-generation millionaires
   The median income is $131,000 per year
   Most invest at least 15% of their income each year
   50% have never spent more than
       $399 for a suit
       $140 for a pair of shoes
       $235 for a wrist watch      From The Millionaire Next Door
                                                             10


Speaking of Millionaires…
                                               (continued)

The lesson is clear. If you want to become a
millionaire, having a high income is not
important. You must be frugal and invest wisely.

 Therein lies the paradox: Do you want to be a millionaire
   or do you want to live like a millionaire? All the people
  you think are millionaires – fancy cars, flashy clothes –
      are really just high-income, high-consumption wage
      earners with 10 credit cards run up to the maximum.
                   The millionaires are the penny-pinchers.
                                              Bizarre, huh?
                                                             11


Speaking of Millionaires…
                                               (continued)

But what about “The Lifestyles of the Rich and
Promiscuous” & Don King & Jennifer Spears
& Brittany Lopez? Huh? What about them?

     The media loves to showcase the high net worth, high
      consumption celebrity figures. The truth is that they
   constitute only a small percentage of the millionaires in
                                          the United States.
  The media advertisers love them because they encourage
                        the “Little Folk” to over consume.
                                                                           12


Speaking of Millionaires…
                                                           (continued)

And when you are sitting at home watching TV
feeling sorry for yourself as you compare
yourself to Donald Rump, instead compare
yourself to the citizens of Niger.
Over 60% of the population live on less than $1 per day.
          About 41% do not have access to clean water.
Over 90% of the women over the age of 15 are illiterate.
     Life expectancy at birth is approximately 44 years.
  In fact, about 1.2 billion people around the world (about 1 in 5)
                      survive on less than $1 a day. (Los Angeles Times)
                                                                      13


Speaking of Millionaires…
                                                      (continued)

So do you still believe that you would live
happily-ever-after if you were a millionaire?
                What You Have
  Happiness = ––––––––––––––––
                What You Want
     Simply put, if you never learn to be happy with what you have,
   you will never be happy. Your wants will always outweigh what
  you have. And even if you do become a millionaire, you will still
   face the same day-to-day travails that everyone faces. Your life
  will be more comfortable, but there is no guarantee of happiness.
                         14


Culture of Consumption


Scandal #23
      Batteries
                                                             15


Disposable or Rechargeable?
      Given normal usage, how many
      alkaline batteries would be replaced by
      one nickel metal-hydride battery?
 A. 25
 B. 100
 C. 500
 D. 750
         The correct answer is (C). Screw the Energizer Bunny!
                                                            16


Beware of Emotions
 Shopping can be an addiction
 Many, many people buy things simply trying
  to fulfill some unmet childhood desire
 “An addiction is any mood-altering behavior that
  the participant is no longer in full control of.”
       John Bradshaw
   Do not think the advertisers do not know all about
    this and other psychological phenomena

                 “She had forty-seven cashmere sweaters.”
                             17


Speaking of Emotions…

       Ever wonder why
   advertisers use sex to
     sell their products?


   “You can keep the beer.
      But I will take the
  bubble-headed, bleached
     blonde with the big
    kn___kers & the tight
      b__t, thank you.”
                                                                                                         18


Does Advertising Really Work?
  Economists estimate that every             “Television commercials
    hour of TV a person watches                 do not affect me!”
each week increases their annual
         spending by about $200.
          In 2005, Nielsen Media
       Research reported that the
         average person watched
 approximately 4½ hours of TV a
       day, or 31½ hours a week.
    At $200 in extra spending for
  each hour watched, that means
  that the average person spends
 an extra $6,300 a year that they            By 2009, the number rose to
     would not have spent if they              almost 5 hours per day.
                 didn’t watch TV.          http://articles.latimes.com/2009/feb/24/business/fi-tvwatching24
        http://www.turnoffyourtv.com/commentary/morons/stupid.html
        Unhappy People Watch TV -- Happy People Socialize and Read
                                                       19


What Factors Motivate You?
Economic Factors                     Social Factors
CPI  - inflation                      Lifestyles
Interest rates     Consumer           Culture
Supply/demand        Buying           Attitudes
Brand name                            Ads/media
                    Influences
Warranty                              Hobbies
Product Quality                       Peer   group
Tax rates

                Personal Factors
  Sex and age                        Housing  type
                    Income
  Marital status                     Ethnic group
                    Education
  Occupation                         Religion
                    Family   size
                                                              20


Speaking of Influences…
 Would someone please tell me why a
 Roach handbag is worth $600 more than a
 JCPenney’s handbag?




     Oh, I am so sorry. “Coach.” For the prices they are
     asking, shouldn’t they really call them “First Class?”
         And do not even get me started on Lousy Vuitton!
                         21


Culture of Consumption


Scandal #73
    Light Bulbs
                                                                22


Incandescent or Fluorescent?
     Given normal usage, how many
     incandescent bulbs would be replaced
     by one fluorescent bulb?
A. 2
B. 4
C. 8
D. 11
     The correct answer is (D). Incandescent bulbs give off 90%
             of their energy as heat. Fluorescent bulbs are cold.
                                                           23


Incandescent or Fluorescent?
   Over its lifetime, how much money will
   one fluorescent bulb save you in energy
   costs at current electricity rates?
A. $25
B. $45
C. $65
D. $110

    The correct answer is (B). But energy prices are rising…
                                                        24


Consumer Purchasing Activities
    Problem identification
    Information gathering: costs, options, consequences
     Sources of attribute assessment
        Personal contacts and experience of others
        Business organizations advertising & media
        Independent testing organizations – Consumer
         Reports
 Price analysis: Are quality and price always related?
 Comparison shopping: Do you take the time to
  comparison shop?
                                                                               25


Consumer Purchasing Activities
                                                              (continued)
                                                all
 Negotiation may be used on some products
                    cash
   Decide on cash or credit
   Get all acquisition and installation costs and
    conditions in writing
   Maintenance and ownership costs may be
    associated with some purchases
    Complain if you are not satisfied with a purchase
      Do you complain if you are not satisfied?
       A 2004 to 2007 survey by Consumer Reports shows that more than
      90 percent of shoppers who asked for discounts got at least one. The
        negotiated price cuts were on a wide range of goods and services,
                        including furniture, electronics, and medical bills.
                                                         26


Practical Purchasing Strategies
   Timing purchases
     When is the best time to buy Christmas cards?
   Brand comparison versus impulse buying
     Store brands can be low-cost alternatives
 Evaluate warranties and service contracts
 Price comparison
     Unit pricing provides a standard of measurement
     Coupons and rebates (partial refund)
     More convenience and ready-to-use products
      mean higher prices (Tightwad Gazette – Potatoes)
     “Sale” does not always mean saving money
        In fact…
                                           27


Pretzel Logic
“But   it’s on sale! Think of
    how much we will save!”
 You may spend less, but you never save
  money whenever you buy something; you
  always spend money whenever you buy
 Repeat after me:
     “Spending is NEVER Saving!”
     “Spending is NEVER Saving!”
     “Spending is NEVER Saving!”
                                28


Pretzel Logic
                  (continued)



 How much did
 we save? $37?
 We didn’t save
   nothin’!
  We spent $75!
                         29


Culture of Consumption


Scandal #118
        Meat
                                                      30


Societal Cost of Meat?
     How many gallons of fresh water are
     used to produce one pound of beef?
A. 100 gallons
B. 500
C. 1,000
D. 5,000


                         The correct answer is (D).
                                                                          31


Societal Cost of Meat?
     How many people can be fed via
     grains with the resources needed to
     feed one person with beef?
A. 5 people
B. 10
C. 20
D. 30
     The correct answer is (D). Plus, meat ain’t the best thing for
                                                yer health, either.
                http://www.nytimes.com/2009/04/28/health/28brod.html?em
                                                                            32


      The Cost of Convenience
                                                           (revisited)

            5 Ounces of Potatoes                                Cost
Potato (10-pound bag)                                           $0.06
Ore-Ida Frozen French Fries (28 oz bag)                         $0.62
Betty Crocker Mashed Potato Mix (13.75 oz box)                  $1.09
Ruffle's Potato Chips (17½ oz bag)                              $1.78
Pringle’s Potato Chips (6.41 oz tube)                           $1.83
McDonald’s French Fries (2 oz serving)                          $2.96
Lay’s Fat-Free Olestra Potato Chips (6½ oz bag)                 $3.12
PopChips Potato Chips (0.8 oz bag)                              $6.19
      Sources: Local grocery store (Stump’s), Vons (H Street), McDonald’s
                                                                              33


Speaking of Food…
                                        2,400 calories
                                           per day




 3,600 calories
    per day
                                                             3,200 calories
                                                                per day


                                                         World average is 2,700
 Source: United Nations Environment Programme                  calories per day
                                                                   34


Speaking of Food…                                 (continued)

  The total daily caloric intake of the
  average American has risen by 148
  calories per day since 1980. This
  amount reflects an extra 15 pounds per
  person each year.
    -- U.S. Department of Agriculture


   Your clothes feeling a little tighter recently? Yeah, me too.
                                                         35


Speaking of Food…                          (continued)

8,000 years ago, this   Today, this is the image of
was the image of the        the ideal woman.
   ideal woman.
                                                      36


Speaking of Food…                    (continued)

     According to a recent study sponsored
     by the USDA, how much of the nation’s
     food ready to harvest never gets
     eaten?
A. 2% to 5%
B. 10% to 15%
C. 20% to 30%
D. 40% to 50%
                         The correct answer is (D).
                                                    37


Speaking of Food…                     (continued)

     And the average family of four throws
     out how many dollars worth of food
     each year?
A. $50 to $75
B. $100 to $150
C. $250 to $300
D. $575 to $600

                          The correct answer is (D).
                         38


Culture of Consumption


Scandal #235
   Bottled Water
                                                                        39


Ads We Would Love to See




       http://www.democracynow.org/2007/8/1/the_bottled_water_lie_as_soft
                                                                                      40


But It’s Really Not Just Water!
     How many plastic water bottles make
     their way into landfills or wind up as
     litter each year?
A. 5,900,000,000 (almost 5 billion)
B. 12,100,000,000 (a bit over 12 billion)
C. 22,600,000,000 (about 22½ billion)
D. 28,000,000,000 (around 28 billion)
                           The correct answer is (C). 62 million each day.
 http://www.container-recycling.org/media/newsarticles/plastic/2006/5-WMW-DownDrain.htm
                   But the State of New York says that it is really closer to (D).
Steps in Resolving                                              41




Consumer Complaints
Return to place of purchase
Contact the company’s main office via telephone
 or their web site
Obtain assistance from a consumer agency
   Better Business Bureau web site to file a complaint
      on line: http://www.bbb.org
       Local Better Business Bureau
     State consumer protection office or agency
     Federal agencies
     Mediation – parties decide for themselves (non-binding)
     Arbitration – third-party decides (binding)
Steps in Resolving                                        42




Consumer Complaints                         (continued)

Take legal action
     Small claims court
     Class-action suits
     Use a lawyer? (can not use one in small claims)
     Other legal alternatives
        Legal aid society
        Prepaid legal services
        Research legal questions at www.nolo.com
        Try mediation or arbitration first
                                                          43


Personal Consumer Protection
   To protect yourself as a consumer…
     Deal with reputable companies
        Avoid doing any business with or giving any
         information to telemarketers / spammers
        www.donotcall.gov
     Avoid signing contracts and other documents you
      do not understand
     Compare financing through the seller with other
      sources such as credit unions
     Avoid rushing to get a good deal
     Be cautious about offerings that seem too good to
      be true – they usually are!
                                                                     44


 Culture of Consumption


Scandal #1

http://www.youtube.com/watch?v=Z2mf8DtWWd8&feature=player_embedded
                                         45



CHAPTER 6 Appendix
 Buying and Operating
 Motor Vehicles

         Or
         “You Are Not What You Drive!”
                                                                          46


  First, Some Statistics…
     Percentages of Short Motor Vehicle Trips…
       49% – Three miles or less
       40% – Two miles or less
       27% – One mile or less
     The Average American Uses as Much
      Energy As…
          3 Japanese
          13 Chinese
          153 Bangladeshis
          499 Ethiopians
“The faster you drive, the more fuel you use. For example, driving at 65 mph,
 rather than 55 mph, increases fuel consumption by 20%. Driving at 75 mph,
           rather than 65 mph, increases fuel consumption by another 25%.”
              http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut10.shtm
                                                             47


Societal Cost of Cars?
     For every one gallon of gas you burn,
     how much carbon dioxide do you pump
     into the atmosphere?
A. 7 pounds
B. 15 pounds
C. 20 pounds
D. 125 pounds
       The correct answer is (C). Here is the chemical formula:
                                 C8H12 + O2  H2O + CO2
                                                                                    48


Societal Cost of Cars?
     How much of our oil do we import?*
A. 12%
B. 27%
C. 48%
D. 66%


     The correct answer is (D). However, we also export 5% so the
                                                net result is 61%.
                       *Energy   Information Agency (EIA) of the Department of Energy
                                                                                        49


Societal Cost of Cars?
     And how much, per person per year,
     do we spend on imported oil?
A. $456
B. $840
C. $1,600
D. $2,240

       The correct answer is (C). The summer of 2008, it was D.
 (13.15 million barrels/day) * ($100/barrel) * (365 days/year) / (300 million people)
                                                                       50


Societal Cost of Cars?
     Let's see, $1,600 per person per year
     multiplied by 300,000,000 people –
     That is approximately...
A. $162,000,000,000 ($162 billion)
B. $292,000,000,000 ($292 billion)
C. $480,000,000,000 ($480 billion)
D. $672,000,000,000 ($672 billion)
    The correct answer is (C). This is your money going to foreign oil
   producing countries like Saudi Arabia, the folks that really brought
  you 9/11. (Psst. It was not Iraq. Don’t tell your Republican friends.)
                                                      51


Societal Cost of Cars?
     So how many barrels of oil (42 gallons of
     crude oil) does each person consume in
     the United States each year?
A. 2.5 barrels
B. 12.8
C. 25.4
D. 112.3

                             The correct answer is (C).
                                                                  52


Have We Learned Anything Yet?
  Barrels of Oil Consumed per Person
    per Year in the United States
      1970 –    26.3 barrels
      1978 –    31.0                       We are now down
                                             to around 25.4
      1983 –    23.7
      2000 –    26.5
         For years, public policy makers and environmentalists
  speculated on what price per gallon would people finally stop
  buying Sport Utility Land Barges. The answer came in 2008.
    Once gas rose over $4.50 per gallon, SUV sales plummeted
                                         and people drove less.
                                  53


New or Used Car?
   Which do you prefer? Why?
   What are the pros and cons?
                                                      54


Buying a Used Vehicle
    Sources of used vehicles
      New-car dealers
      Used-car dealers
      Private parties
    Consult Consumer Reports
      Yearly Buying Guide – Reliability statistics
      Consumer protection for used car buyers
      T’ain’t much!
                                                             55


Inspecting a Used Car
  Outside the car
  Inside the car
  The engine
      Mechanic’s inspection
      Odometer fraud & crashed, salvage vehicles
          Check carfax.com
    The road test


        Find an honest mechanic and pay for an inspection!
                                                       56


Used Car Price Negotiation
   Price information sources
     Edmund’s Used Car Prices or edmunds.com
     NADA Official Used Car Guide
     Kelly Blue Book kbb.com
   Consult a friend who is a car enthusiast!
     Better yet, have him or her come with you when
      you shop
                                                                                       57


Buying a New Vehicle
   Over half of all new vehicle purchases now
    involve some Internet interaction
      From gathering information to actual purchasing
   Average cost of a new vehicle now exceeds
    $28,400 – Ouch! (source: http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut11.shtm )
   Do not be swayed by advertising
      Check Consumer Reports
                                                     “You can keep the car. But I
 20%         Gone!                                  will take the bubble-headed,
                                                     bleached blonde with the big
      What?!                                         kn___kers & the tight b__t,
                                                              thank you.”
                                                        58


    Selecting Options
   Mechanical devices
     Engine size
     Cruise control
   Comfort and convenience options
     Air conditioning
     Stereo systems
   Aesthetic features
     Special paint
     Mag wheels
   Service contract – Do Not Fall For This!
     Unless the car you want has a less than stellar
      repair record (Check Consumer Reports)
                                                        59


Negotiating the Price
   Sticker price (a.k.a. suggested retail price)
     It includes the base price plus the accessories
   Invoice price – dealer’s cost
   Know the dealer’s cost by consulting...
     Consumer Reports consumerreports.org
     Edmund’s New Car Prices edmunds.com
   When is the dealer’s cost not the dealer’s
    cost? When the factory’s monthly incentive
    check comes in at the end of the month!
                                               60


Determining the Purchase Price
     Price bargaining
     Set-price dealers
     Car buying services
       Also called an auto broker
     Online car buying
     The sales agreement – Read it!
     Consumer protection for new-car buyers
       Each state has its own lemon laws
                                                        61


Financing an Automobile Purchase
     Financing sources
       Banks, credit unions, finance companies, or
        dealer financing
       Many lenders will preapprove a certain
        amount
     Consider the length of the loan
       Upside-down equity means that your car is
        worth less that what you still owe on the car
        loan (a.k.a. negative equity)
                                                               62


Leasing a Vehicle
   Closed-end versus Open-end lease
   Advantages
     Small cash outflow
     Lower monthly payments than buying
     Lease provides detailed records
   Disadvantages                               My advice?
     No ownership interests               Only lease if you
     Must meet requirements              are sure you have
                                            no intentions of
     May have additional costs
                                            keeping the car
       Especially for any extra miles!
                                                         63


Leasing a Vehicle                          (continued)

   However, the large number of recent leases
    has created an excellent opportunity for
    used-car buyers
   Example:
     3-year lease of a $45,000 Sport Utility Tank
     Expected residual value (a.k.a. lease-end value)
      of $32,000
     Lessee politely sez, “No, Thanks.”
     You pick up the vehicle from the leasing
      company for around $20,000
   Better yet, buy an econo-box for $15,000
                                                                 64


What Kind of Vehicle?
      According to our authoritative and
      detailed scientific research, we have
      found that the larger the motor vehicle,
 A.   The smaller the IQ of the driver
 B.   The more fragile the ego of the driver
 C.   The greater the sense of powerlessness within
      and anger toward the society around them
 D.   The more microscopic the reproductive organ
 E.   All of the above
      The correct answer, of course, is (E). My sincerest apologies
        to those of you who own a Ford Extinction (not really )
                                                                       65


Costs of Operating a Car
   Fixed Costs
     Depreciation – 65% after 5 years (average)
        That $28,000 car will be worth $9,000 in five years
     Finance charge – Interest on loan
     Insurance
     License, registration & taxes
   Variable Costs
       Gas and oil
       Tires
       Maintenance & repairs
       Parking and tolls
http://www.aaaexchange.com/Assets/Files/201145734460.DrivingCosts2011.pdf
                                                                       66


Costs of Operating a Car                                (continued)

      According to the AAA, what is the
      average cost per mile to own and
      operate a new car in 2011?
 A. 12.5¢ per mile
 B. 25.8¢
 C. 40.9¢
 D. 58.5¢
   The correct answer is (D). So at 15,000 miles per year, that’s…
http://www.aaaexchange.com/Assets/Files/201145734460.DrivingCosts2011.pdf
                                                                             67


Costs of Operating a Car                                     (continued)

   Average of over $8,776* per year per car (58.5¢/mi)
     Many families have two cars
     40 years * $17,552 per year = $702,080!
   Jonathon Pond’s study – 1980’s
     Buying a new car every 4 years, versus
     Buying a new car every 10 years and investing the
      savings (including the cost of maintenance)
     At the end of 40 years, you would have $350,000
        And those were 1980’s dollars – double it for now
                                                     My advice?
      Buy a reliable new or used car and run it into the ground!
     * Forbes says that the number is closer to $12,000 per year for new cars.
                But that is probably because they concentrate on luxury cars.
                                                      68


Servicing Your Car
    Follow the maintenance schedule in the
     manual (?)
    Vehicle servicing services
      Car dealers
      Automobile repair shops
      Service stations
                                       My advice?
      Discount stores              Find an honest
    Specialty shops             mechanic and stay
                                      loyal to ‘em!
      Jiffy Lube (?)
      Midas
                                                              69


Bottom Line on Cars
 Get a bicycle! scooter! motorcycle! (Get training)
 I have >56,000 miles on my commuting bicycles
     At 58.5¢ per mile, I have saved over $32,000 in vehicle
      costs
     Plus I have saved a tremendous amount in health care
      costs
        Before I started riding again, I was a paunchy 30-
         something male suffering from Sedentary Lifestyle
         Disease (Now I am just paunchy…)
     Do not forget the savings to the environment
        Difficult to estimate but nevertheless do exist
   Besides, it is fun to ride past people stuck in
    traffic in their cars as they are driving to the gym!
     And it is only going to get worse…

								
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