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Category Archives: Purchasing Tips

Buying Used Cars

One way to save money on a car purchase is to avoid buying brand new vehicles.  New car prices are inflated for various reasons including dealerships adding additional, often unnecessary services and the ability to finance the cost with debt.  As a result new cars often suffer from steep depreciation, a decrease in value, as soon as you drive them off the lot.  You may be familiar with this by the common phrases “upside down” or “under water”, referring to owing more on the car loan than the car is worth. Depreciation will continue throughout the life of the car, but it becomes more gradual with time, and the value becomes a reflection of how well the car has been maintained, overall condition, and its mileage. This makes buying a used car a good option for potentially saving money.

The benefit to purchasing a used car is that the depreciation can be accounted for, so you are more likely to get the car at a price closer to its real value. However, the trade-off with buying a used car is that there are fewer protections for consumers, making due diligence very important before closing a deal.

One major consumer protection lost is the ability to hold anyone responsible for a “lemon”.  Lemon cars have serious, warranty covered problems, which fail to be corrected after a reasonable number of repair attempts, or cause the loss of use for over 30 days.  If a car is a lemon, you may be able to get a refund or a replacement from the manufacturer.  This only applies to new cars; lemon laws do not apply to used cars.

Buying a used car that has serious defects requiring costly repairs, leaves you stuck with the bills and a potentially useless car.  It is in your best interest take steps to protect yourself before deciding to drive away with that new-to-you used car.  Below is a list of some things the Missouri Attorney General recommends before buying a used car:

  • Look at the car during daylight. Any damage, defects or other problems will be easier to spot.
  • Run a title search to learn more about the vehicle’s history.
    • This will show you if it’s been in accidents.
    • If there have been many different owners, it could be a sign of problems.
  • Test-drive it. Any seller should allow this.
    • Be sure to test out all of the features, switches, buttons, etc.
  • Have a mechanic (chosen by you, not the seller) put the car on a lift and inspect it.
    • You can also get an on board diagnostics (OBD) scan free from most car parts stores.  Helpful for finding out what’s causing that check engine light.
  • Get proof of inspections for safety and emissions if applicable. Missouri law requires a seller to take care of inspections before the sale. Exception: New vehicles are exempt from these inspections in the first two model years.

Buying a used car can be a great way to save money on the up-front cost of a car.  But, if you don’t take steps to make sure the car is in good working order, you may end up paying much more than you bargained for in repair charges.  For more information on the subjects covered in this financial tip, please see the Missouri Attorney General’s informational letter, “All About Autos, New Cars, Used Cars, and Repairs”, found at this link: https://www.ago.mo.gov/docs/default-source/publications/allaboutautos.pdf?sfvrsn=4

If Home Repair Offer Sounds Too Good, Watch Out

Spring will soon be here, and so will warmer weather and more opportunities to enjoy the outdoors. Here in the Midwest, Spring can also bring storms, flooding, hail and tornados. Severe spring weather could leave you looking for help with home repairs. While there are many legitimate businesses that offer home repair services, it is important to be cautious in order to avoid home-related repair fraud.

This can be especially true when an area experiences severe weather that results in a large number of insurance claims being made. It’s also common for the elderly to be prime targets for these repair schemes, since many seniors own their homes and frequently need help with repairs. However, with damage left by flooding or other disasters, people of any age could become victims if they aren’t careful.

Warning signs to watch for include:

  • Someone comes to your door with materials left over from another job
  • Prices are much lower than other estimates
  • The price is only available today
  • The company uses a post office box and has no street address or telephone number
  • Full payment is due before the work is completed
  • The contractor will not give you references

In order to get the job done right, know what you want done before talking with legitimate, local contractors. Ask for identification before letting anyone into your home. Get detailed estimates, in writing, from several reputable, licensed contactors and find out if the contractors are insured and bonded.

It’s important to know who you’re dealing with and be aware that someone showing up on your doorstep may be targeting you. Ask for references, check them and ask about the availability of warranties on repairs or materials used. You can also find out more about potential contractors by looking them up on third party review sites such as www.angieslist.com or www.houzz.com, or see how they rank with your area’s Better Business Bureau (www.bbb.org).

Finally, get a written contract before the work is started to avoid surprises or misunderstandings, and make sure this includes the company’s address and telephone number. If you suspect fraud, contact local authorities immediately and your state’s Attorney General’s Office (in MO, the Attorney General’s Consumer Protection Hotline is 800-392-8222).

Remember, if it sounds too good to be true, it probably is.

– Janet LaFon, Family Financial Education Specialist, University of Missouri Extension

Home “Sweat” Home

Robert O. Weagley, Ph.D., CFP®

This past weekend I, finally, had a weekend where I could stay home and get some work done on my yard. Then, it rained all day on Saturday. Sunday, the grass dried and, by mid-day, I could plant seedlings in my garden, while relishing in the sticky Missouri clay covering my hands; mowed the yard; and performed other assorted tasks on my quest for nirvana through the art form I call Zen and the Art of Weed Pulling. (Seriously, I try to put myself into a state of consciousness where, when I pull weeds, I stretch my 63 year old muscles while mindfully pulling each young intruder in the attempt to remove all evidence of its existence on my part of our planet. While I am seldom successful, I am delighted to report that others share this illusion. Check out this article in the Washington Post: http://www.washingtonpost.com/local/zen-and-the-art-of-weeding/2013/05/12/b780c600-b97c-11e2-92f3-f291801936b8_story.html )

While I suppose this is therapeutic (most of my friends know that I need to find the time for therapy), my children never shared my passion for yard work. That is, unless they were having their friends over for a party and then, they encouraged me to find time to get ‘er done. Little did I know that my millennial children were simply demonstrating traits of their generation. Millennials tend to be liberal in political ideologies, supporting gay marriage and legalization of cannabis; less likely to practice organized religion; more likely to be unemployed; and more likely to return to their parents’ home to live. Moreover, in the aftermath of the Great Recession, they are less likely to be home owners and to continue to rent their housing. Why?

For most people, buying a home requires one to borrow money. Besides witnessing the problems of homeowners during the recession, young people have average student loan debt of nearly $30,000 in 2012, growing from $18,650 eight years earlier. Studies of the cost of renting compared to buying consistently find that owning is less expensive. Yet, these studies often only compare the cash flow of paying rent versus mortgage payments, while neglecting home purchase costs such as a down payment, closing costs, and higher interest rates charged to purchasers with substantial existing debts, such as a student loan and credit cards. The net worth of millennials may be holding them back, while they rent to become financially prepared to own. Although surveys show that the percentage of millennials who say this is the reason for renting has been falling, the issue of dollars is always key to decisions of a relatively large magnitude. This may be especially true for the generation who witnessed the mass foreclosures of recent years. Looking past the money, what is driving this trend?

For one, every generation likes to spend time with others like them. Urban, apartment living provides entertainment, restaurants, concerts, civic events, and nightlife. Often, smaller studio apartments may be rented with the amenities being shared with other tenants. Movie rooms, exercise equipment, social recreation rooms with ping-pong and pool tables, a swimming pool, a sharing library, electric car charging ports, as well as other life enhancers are often available to renters in newer complexes in redeveloped urban areas.

When millennial renters begin to have children and consider the suburbs for their children’s socialization, they may still rent until they get to know their new community and their habits within the community. If they don’t like where they are, renting provides the flexibility to move. The flexibility to move is key to this group. The Bureau of Labor Statistics reports that they tend to change jobs three times more often than those older. It is clear that renting makes it that much easier to “move on up” should the opportunity arise.

While it is generally assumed that a neighborhood of home owners is more stable and safe, it is also true that, if one is blessed with a bad neighbor, a renter only has to put up with it until the lease expires. With homeownership, one may have to wait until the neighbor, or you, die. You just never know when the American dream becomes the nightmare on Elm Street.

Finally, if you don’t own your home you likely do not have to sweat while cleaning the gutters, mowing the lawn, or gardening. Moreover, you do not have to pay for repairs, upgrades, and the inevitable furniture that must be purchased to fill the rooms. Renting keeps these items out of your budget, giving you more resources for that coveted trip to Chile, like my millennial colleague took over Christmas. On the other hand, you won’t be able to build the equity from homeownership, develop lifelong friends for your children and yourself that follow from a stable neighborhood, and, perhaps, you just might find that homeownership completes your picture of financial success. Or, it just might be the case that you discover that you revel in the Zen of pulling weeds, while sweating around your home, sweet home.

Grocery Savings

By Dr. Rebecca J. Travnichek, AFC®

You don’t have to be an extreme couponer to save money on your groceries. Here are nine things you can do each month to save your family $200/month.

  1. Make a list and stick to it! Planning meals in advance and making your grocery list before you go grocery shopping will help you to not give in to temptation and buy impulse items. Research has found that unplanned grocery purchases can add an extra 20% to your grocery bill. Monthly savings = $50.
  2. Paper or plastic? Not bags as you may be thinking. I am talking about cash or credit. If you are going to buy groceries on credit, be sure to use a card that works for you. By this I mean use one with cash back, rewards, and instant discounts. However, if you rack up interest charges by not paying it off each month, you lose any savings it provided you. Monthly savings = $15.
  3. Snip ‘n’ Save. Yes, coupons can save you money. Spend no more than 10-15 minutes a week thumbing through weekly ads for coupons or cruise websites like Coupons.com. Only use coupons on items your family needs. Buying just because you have the coupon doesn’t save you anything. Monthly savings = $15.
  4. Cash incentive. Research has shown that consumers who shop with cash only, spend 12%-18% less than those who shop with credit cards. So leave the cards at home and take only what you have budgeted for groceries in cash. Monthly savings = $40.
  5. Shop around. While looking for coupons in the weekly ads, be sure to check the prices for the items on your grocery list. Or better yet, use the grocery ads to plan your meals in order to take advantage of grocery sales. However, driving to 10 different stores may end up costing you more. Monthly savings = $25.
  6. Try generic. I know. Some of you may be thinking, I hate generic! However, store-brand products have improved over time. Oftentimes generic products are made by brand-name manufacturers and they may cost 20% less. Give generics a try the next time you go to the store. Monthly savings = $20.
  7. Avoid gimmick pricing. I bet all of you have seen the “10 for $10” sales or something similar in the stores. Don’t fall for this. Be a smart consumer and check the prices are on similar products, they may be cheaper. Besides, you may not be able to use the items before they expire. Monthly savings = $5.
  8. Pricey things come in small packages. Tiny bags are cute. But you are almost always better off to purchase the larger package sizes and divvy them up yourself. Use the nutrition label for correct portion sizes. Monthly savings = $20.
  9. Time is money. Convenience foods may save you time, but they also cost you more money than buying fresh, unprepared items. For example, a bag of pre-cut salad vs. buying a head of lettuce and your choice of veggies. The fresh lettuce and veggies will feed more family members over a longer period. Monthly savings = $10.

Apply all nine tips shared for reducing your grocery bill and keep $200 each month in your pocket to use for your family’s financial goals.

For more information on ways to save money on your groceries and other household expenses, check out the websites below:

Dr. Rebecca J. Travnichek, AFC®
Family Financial Education Specialist
University of Missouri Extension – Camden County
TravnichekR@missouri.edu

Is it Better to Use a Debit Card or a Credit Card for Purchases? Consider the Differences in Customer Liability Before Deciding

By Jesse B. Jurgenson

Whether it is better to use a debit card linked directly to a consumer’s checking account or a traditional credit card for most purchases is a common question that I have received over the last decade. It has mostly came from individuals whose concern lies not as much with their ability to pay for the purchases (low or interrupted income) as it does with a desire to make the most of the present consumer protection laws and continue down the path to meet their own long-term financial goals.

Assuming that you are one of the estimated 62% of the population who do not carry a balance on a credit card by paying the amount owed in full each and every month by the due date[1] and show financial maturity by not spending beyond your true financial ability, choosing between using a debit card or a credit card for most purchases may come down to a “what is in it for me?” question.

Some benefits of using a debit/ATM card are:

  • Saving yourself from yourself. A debit card increases the chances you will stay within budget since you are limited by the balance available in your account which lowers the risk of accumulating debt.
  • Access to your own money. Easily get cash from cash machines or cash back from purchases.
  • A built-in password. Having a Personal Identification Number (PIN) is an extra layer of security if the debit card is lost or stolen.
  • Ease of transactions. Debit cards are certainly safer and more convenient than carrying cash or checks and are accepted at a large majority of retailers.

A few benefits of using a traditional credit card are:

  • Credit reporting. Credit card activity is commonly reported to the credit bureaus and work to build a positive credit history (assuming you make at least the minimum payment by the due date) which will come in handy when you look to borrow money for larger purchases such as a house or a new-to-you vehicle. Generally speaking, debit card activity is not reported to the credit reporting agencies.
  • Universal acceptance. On top of being accepted at a large majority of merchants, certain transactions such as renting a car or hotel room require a credit card rather than a debit card to protect the merchant against damage you may cause to the vehicle or room.
  • Rewards and perks. Many credit cards offer benefits that you don’t see with debit cards such as cash back, airline miles, extended warranties, rental car insurance, travel insurance, purchase protection, roadside assistance, specific store discounts, or exclusive coupons.

However, there is one other difference between the two payment options that you may also want to consider. The concern over identity theft, unauthorized purchases, and retailer errors have garnered national and worldwide news recently with the massive payment data breaches from corporations such as Target[2] and The Home Depot[3]. Having shopped at both of those retailers during the suspected vulnerable times, I decided it was best for me to be proactive in protecting myself. I requested a new account number from my financial institution in addition to performing due diligence on my monthly statement. I was fortunate to not run into any issues, but what if an unauthorized payment had been made on my account and I had not noticed? Let us explore how the existing consumer protection laws, the Fair Credit Billing Act (FCBA)[4] and the Electronic Funds Transfer Act (EFTA)[5] may factor into making a decision to use the product that is best for you and your household.

Credit Card Loss or Fraudulent Charges[6]

Under the FCBA, your liability for unauthorized use of your credit card tops out at $50. However, if you report the loss before your credit card is used, the FCBA says you are not responsible for any charges you didn’t authorize. If your credit card number is stolen, but not the card, you are not liable for unauthorized use. This means that if the thief uses your card by phone or the Internet, you have no liability[7].

Call the card issuer as soon as you realize your card has been lost or stolen. Many companies have toll-free numbers and 24 hour service to deal with this. Once you report the loss or theft, the law says you have no additional responsibility for charges you didn’t make[8]; in any case, your liability for each card lost or stolen is $50. If you suspect that the card was used fraudulently, you may have to sign a statement under oath that you didn’t make the purchases in question

ATM or Debit Card Loss or Fraudulent Transfers

If you report an ATM or debit card missing before someone uses it, the EFTA says you are not responsible for any unauthorized transactions. If someone uses your ATM or debit card before you report it lost or stolen, your liability depends on how quickly you report it:

If you report: Your maximum loss:
Before any unauthorized charges are made. $0
Within 2 business days after you learn about the loss or theft. $50
More than 2 business days after you learn about the loss or theft, but less than 60 calendar days after your statement is sent to you, $500
More than 60 calendar days after your statement is sent to you. All the money taken from
your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.

If someone makes unauthorized transactions with your debit card number, but your card is not lost, you are not liable for those transactions if you report them within 60 days of your statement being sent to you. If you can convince the bank that your notification failure was due to extenuating circumstances, it must extend the notification timeline for a “reasonable period6.”

Under the EFTA, a bank has 10 business days to investigate the matter (20 business days if your account is new) and report back to you with its results. If the bank needs additional time, it may, under certain circumstances, temporarily give you some or all of the disputed amount until it finishes its investigation[9].

Summary

The consumer protections currently provided by the EFTA and FCBA are very similar for both credit cards and ATM/debit cards as long as an individual notices the disputed item and informs their bank, credit union, or credit card issuer within a very short amount of time. Where we start to see a difference are when someone may not be spending the time to inspect their account transactions. The potential for unlimited loss is present with an ATM/debit card where that potential is not present with a credit card transaction. If you are an individual who uses a debit card for most purchases and does not keep a careful watch over their account transactions on a regular basis, you are increasing your risk of potentially losing money to errors and fraud.

Guest contributor Jesse Jurgenson is an AFCPE Accredited Financial Counselor and past Financial Counseling Supervisor with an NFCC certified non-profit family service organization. He is also a current Ph.D. student and Graduate Instructor in the Personal Financial Planning Department.