Question 1

Which of the following statements concerning auto leasing is false?

Accepted Answer

Auto leasing for personal use does not provide significant tax benefits. Tax benefits may be available for leasing a car for business use.

Question 2

You have been considering using the available mass transit to get to work.A bus ticket to travel the 10 miles from your home to your place of employment costs $2.You have calculated the cost of ownership of and the cost of operations for the auto you are presently using to commute.These are,respectively,45 cents per mile and 13 cents per mile.Accordingly,if you are interested in reducing your current expenses,you should consider

Accepted Answer

The answer of You have been considering using the available...

Question 3

After reviewing the household budget,you estimate the following auto costs
Ownership cost per mile $ .30
Operating cost per mile .15
Total cost per mile .45
The marginal cost of driving your car another mile is therefore

Accepted Answer

The marginal cost of driving the car another mile is the cost per mile, which is $0.45 according to the given information.

Question 4

Car rental leases are either "open-end" or "closed-end." The basic difference between the two is that

Accepted Answer

With an open-end lease, the lessee is responsible for any difference between the estimated resale value and the actual resale value of the vehicle at the end of the lease. This means that the monthly payments can vary depending on the actual resale value. In contrast, a closed-end lease sets a fixed monthly payment based on the estimated depreciation of the vehicle, and the lessor is responsible for any difference in actual resale value. Therefore, option D is the correct choice.

Question 5

Which of the following is not a relevant cost in the lease-buy decision?

Accepted Answer

Gasoline consumption is not a relevant cost in the lease-buy decision because it is a variable cost that will occur regardless of whether the vehicle is leased or bought. The relevant costs in the lease-buy decision include the cost of the lease payments, the cost of financing a purchase, any upfront fees or down payments, as well as any additional costs or penalties associated with each option. B, C, and D may all be relevant costs depending on the specific terms of the lease or purchase agreement.

Question 6

You have been considering using the available mass transit to get to work.A bus ticket to travel the 10 miles from your home to your place of employment costs $2.You have calculated the cost of ownership of and the cost of operations for the auto you are presently using to commute.These are,respectively,45 cents per mile and 23 cents per mile.Accordingly,if you are interested in reducing your current expenses,you should consider

Accepted Answer

The answer of You have been considering using the available...

Question 7

Which of the following statements concerning auto lemon laws is false?

Accepted Answer

The statement that the owner is entitled to protection under the lemon laws if the defects cannot be repaired within 30 days of the initial complaint is false. This time period may vary by state, but typically the manufacturer is allowed a "reasonable number" of repair attempts before the owner may be entitled to protection under the lemon laws. The specific number of repair attempts required may be outlined in the state's lemon law or may be determined by a court.

Question 8

Which of the following is likely to have a higher implicit cost when purchasing instead of leasing?

Accepted Answer

When purchasing instead of leasing, there is an up-front payment that could be invested to earn returns. By choosing to spend the money on purchasing, there is a lost opportunity to earn interest on that money, which is the implicit cost. The other options listed, such as licensing costs, annual depreciation, and disposition charges, would likely have similar costs whether purchasing or leasing.

Question 9

One common characteristic of open-end leases is that

Accepted Answer

Open-end leases, also known as finance leases, do not have a set total cost at the beginning of the lease term. The total cost is determined at the end of the lease based on the residual value of the leased asset. This contrasts with closed-end leases, where the lessee knows the total cost upfront.

Question 10

Consumer durables give rise to multiple entries on the household budget.

Accepted Answer

Consumer durables are often major purchases that require a significant investment and can take up a significant portion of a household's budget. As such, they can give rise to multiple entries on the household budget, including the initial cost of the purchase, ongoing maintenance and repair costs, and potential replacement costs.

Question 11

The cost of ownership

Accepted Answer

The cost of ownership includes various financial costs such as maintenance expenses, insurance, taxes, and depreciation. These costs are typically fixed and are considered sunk costs as they cannot be recovered. Therefore, all of the given options (A, B, and C) are correct.

Question 12

When a closed-end lease expires,

Accepted Answer

With a closed-end lease, you may have to pay additional charges for excess mileage and damage to the vehicle when the lease expires. These charges may vary depending on the terms of the lease agreement. Option A is not true because there may be additional charges, and option B is only applicable if the resale value of the car is less than anticipated. Option D is not true because ownership of the car stays with the leasing company.

Question 13

A seller of mail order merchandise must get your approval for delaying a shipment more than 30 days or refund you your money.

Accepted Answer

This is required by the Federal Trade Commission's Mail or Telephone Order Merchandise Rule. If the seller cannot meet the promised shipping date, they must obtain your consent to a delay, or provide a refund.

Question 14

A check is the most secure form of payment for purchases on the Internet

Accepted Answer

Checks cannot be used for online purchases, as they require physical delivery and processing. Online payments through credit/debit cards or online payment gateways are generally considered more secure than checks for online purchases.

Question 15

In a mediation

Accepted Answer

In a mediation, the parties to the dispute work together with the help of a neutral third party (the mediator) to come up with their own mutually agreeable solution to the problem. The mediator does not make a decision or impose a solution on the parties; instead, they facilitate communication and negotiation between the parties to help them find common ground.

Question 16

Under a "secret warranty" the owner receives reimbursement for defects only if he or she

Accepted Answer

A "secret warranty" is a warranty that is not advertised or publicly disclosed by the manufacturer. In order to receive reimbursement for defects under this type of warranty, the owner typically needs to complain to the dealer or manufacturer about the issue. This is because the manufacturer may not be aware of the defect and needs to be notified in order to provide reimbursement.

Question 17

The "gross capitalized cost" is supposed to most closely represent

Accepted Answer

The gross capitalized cost is the negotiated price of the car. It includes any added features, taxes, and fees. It does not include the trade-in value or the interest payments.

Question 18

"Arbitration" is an industry term for

Accepted Answer

Arbitration refers to settling disputes through the decision of an impartial third party. It is commonly used in various industries, including automotive, to resolve conflicts and avoid going to court.

Question 19

A "capitalized cost reduction" on an auto lease

Accepted Answer

A capitalized cost reduction is an upfront payment made at the beginning of a lease that reduces the overall cost of the lease. This payment is referred to as a "cap cost reduction" or "cap cost" for short. It is not directly related to your monthly payment, but rather a way to lower the total cost of the lease. The amount of the cap cost reduction is negotiable and can be any amount that you and the leasing company agree upon. However, it is typically no more than one or two monthly lease payments.

Question 20

The Consumer Leasing Act of 1977

Accepted Answer

The Consumer Leasing Act of 1977 requires leasing companies to disclose important terms and conditions of the lease in writing, such as the number of payments, monthly payment amount, and penalties for late payments, but it does not place statutory limits on monthly payments or prohibit open-end leases.

Quiz 7: Consumer Durables: the Personal Auto