Comprehensive Guide to Vehicle Buying, Leasing, and Consumer Rights

Planned buying

Entails thinking about the details of a purchase from the initial desire to buy to satisfaction after the purchase.

Big-ticket items

Products that have a high selling price are sometimes called durable goods. They last a relatively long time and hopefully provide utility to the user for years to come.

The 7 distinct steps in the planned buying process

1. Prioritize Wants

2. Preshopping Research

3. Fitting the budget

4. Comparison Shopping

5. Negotiating

6. Making the Decision

7. Evaluating the Decision

Need

Something thought to be necessary as part of living a healthy life.

Wants

Unnecessary but desired.

Preshopping research

Gathering information before actually beginning to interact with sellers.

Consumer Reports

A publication that objectively tests and reports on numerous product categories.

Manufacturer's suggested retail price (MSRP)

the retail price set by the manufacturer and posted on the federally required side window sticker. The dealership wants customers to pay full MSRP plus any miscellaneous charges.

Dealer invoice price

the amount the automaker charges the dealership for new vehicles at the time the dealer buys them, and it does not reflect some discounts that the dealer gets.

Average price for new cars and trucks

Well over $45,000.

Average length of a car loan

72 months or six years.

Comparison shopping

the process of comparing products or services to find the best buy.

Best buy

A product or service that represents the best combination of quality and price.

Impulse purchase

An unplanned decision to buy a product or service made just before a purchase.

Window shopping

The activity of looking at the goods displayed in shop windows, without intending to buy anything.

Upside down or negative equity

A situation where the owner of a financed asset owes more than it is worth.

Loan preapproval

Lets us know how much we can borrow and at what interest rate.

Balloon automobile loan

Loans that require a larger-than-usual one-time payment at the end of the term.

Subprime loans

Type of loan approved for people with substandard credit scores or limited credit histories.

Rebate

The seller refunds a portion of the purchase price of the product either as a direct payment or a credit against the purchase.

Lease

Rental of a product while the ownership title remains with the lease grantor.

Pitfalls of leasing to avoid

1. Avoid paying money up front. 2. Avoid being upside down with gap insurance.

Safety Tests

Conducted by NHTSA and IIHS to evaluate vehicle safety.

Recalls on used vehicles

Visit SaferCar.gov to see whether the vehicle has been recalled.

Did You Know?

About 17 million new cars, light trucks, and SUVs are sold in the United States annually.

Vehicle depreciation

A vehicle depreciates quickly, 11 percent immediately and 20 percent in the first year.

NHTSA's safest models

Those with five-star ratings.

IIHS Top Safety Picks

The safest models listed in its yearly report.

lessor

leasing agency

lessee

consumer

gross capitalized cost (gross cap cost)

includes the price of the vehicle plus what the lessee paid to finance the purchase plus any other items the lessee agreed to pay for over the life of the lease, including insurance or a maintenance agreement.

Capitalized cost reductions (cap cost reductions)

monies paid on the lease at its inception, including any down payment, trade-in value, or rebate.

adjusted capitalized cost (adjusted cap cost)

determined by subtracting the capitalized cost reductions from the gross capitalized cost.

residual value

the projected value of a leased asset at the end of the lease.

money factor (lease rate or lease factor)

measures the rent charge portion of your payment.

Open-End lease

the consumer pays any difference between the projected residual value of the vehicle and its actual market value at the end of the lease period.

depreciate

goes down in value

closed-end lease (walkaway lease)

the holder pays no charge if the end-of-lease market value of the vehicle is lower than the originally projected residual value.

excess mileage charge

fees assessed at the end of a lease if the vehicle was driven more miles than originally specified in the lease contract.

acquisition fee

either paid in cash or included in the gross capitalization cost.

disposition fee

assessed when we turn in the vehicle at the end of the lease and the lessor must prepare it for resale.

early termination charge

may also be levied if we decide to end the lease prematurely.

warranty

an important consideration in comparison shopping. This is a type of guarantee that a manufacturer or similar party makes regarding the condition of its product.

implied warranty (a warranty of merchantability)

the product sold is warranted to be suitable for sale and to work effectively whether or not a written warranty exists.

product sold 'as is'

we have no legal recourse if it fails to perform, even if the salesperson made verbal promises to take care of any problems.

express warranties

written and oral warranties.

full warranty

a promise to the consumer that the manufacturer will repair the item for free during a set period.

limited warranty

offers less protection than a full warranty.

service contract (extended warranty)

an agreement between the contract seller and the buyer of a product to provide repair or replacement for covered components of the product for some specified time period.

Negotiating

the process of discussing the actual terms of an agreement with a seller.

dealer holdback (or dealer rebate)

a percentage of the total MSRP that the manufacturer holds and then gives back to the dealer.

new-vehicle buying service

an organization that arranges discount purchases for buyers of new cars.

Professional shoppers

in exchange for a fee will find the best available price from a nearby dealer and finalize the sale.

high-balling

sales tactic in which a dealer offers a trade-in allowance that is much higher than the vehicle is worth.

low-balling

involves quoting and getting a verbal agreement from a buyer for an artificially low price.

Buyer's remorse

a myth pertaining to the buyer's supposed legal right to change their mind and return a vehicle after signing a purchase contract.

buyer's order

written offer that names a specific vehicle and all charges.

FTC's cooling off rule

gives consumers 3 days to cancel a contract of $25 or more after signing it for a sale made anywhere other than a seller's normal place of business.

mediation

a procedure in which a neutral third party works with the parties involved in the dispute to arrive at a mutually agreeable solution.

arbitration

a neutral third party hears the claims made and the positions taken by the parties to the dispute and then issues a ruling.

lemon laws

state laws that provide guidelines used by an arbitrator to order a dealer's buyback of a 'lemon.'

lemon

a vehicle that was in the shop for repairs 4 times for the same problem in the first year after purchase.

redress

to right a wrong.

small-claims court

civil matters are often resolved without the assistance of attorneys.