Analysis Of Decision Making Process In Purchasing A Vehicle

The decision to purchase a personal vehicle is influenced by many factors which vary from economic, the performance of the vehicle, social and personal issues. This does not leave out the fact that considerations have to be made on the economic status because this affects many aspects including pre- purchasing and after- purchasing of the vehicle.

The role of interest rates and the cost of financing during decision making process;

As a consumer who is interested in making the right and appropriate decision in purchasing a vehicle, the financial contract one can go for is for instance one where the rates of payment is lower although it will have higher total costs at the end.  A purchase should be made depending on the interest rates and the down payment as well as the payment period(Neumeyer, & Perri, 2005).  The interest rates affect purchase of goods and services in this case the vehicles as high rates lead to less demand for automobiles.  With the existence of loans, people are able to spend money immediately as they get it rather than making savings to purchase it later. In the case where rates are low, more purchases are made for even goods of high purchasing cost as they have more money to spend.  On the other hand when interest rates are high, consumers cut down on spending as a result of less disposable income.

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The rising and falling interest rates affects inflation and recession where high interest rates mean that the economy is growing leading to less money borrowing and consequently high inflation(Neumeyer, & Perri, 2005). This is controlled by having the federal system which determines the rate at which banks are able to lend money to each other and hence the rates at which loans are issued to consumers.  Inflation and recession are kept at manageable rates using indicators such as Consumer and Producer Price Indices.

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In making the decision whether to purchase the vehicle, the consumer should take the option in which the interest rates are low, so that they are able to pay for the loan without influencing their day to day lives in a case where they would be straining to make huge payments to cover up for the loan. In this scenario the buyer should then purchase when the rates are as low as possible.  Depending on the cost of financing of the particular vehicle, the consumer is able to make an adequate decision according to their financial capability for their new product. In other words the decision should to purchase the vehicle when interest rates are high will not be favorable.

The influence of gasoline prices on the choice of vehicle selected:

The decision to purchase either a new or used- vehicle is highly dependent on what is likely to be the future fuel prices. The prediction, whether simple or sophisticated, will enable the consumer to make good decision as high fuel prices lead to purchasing of fuel efficient automobiles, the only technique that a buyer can apply is that to consider the expected future prices which is influenced greatly on the availability of crude oil and also its efficiency(Castilla, & Haab, 2013).

For instance, purchasing a vehicle without proper knowledge of how fuel prices may fall and rise from time to time may lead to straining in future so that the vehicle has adequate fuel which in the long run may lead to bankruptcy.

Some consumers due to the fact that the changes in fuel prices are not predictable in a short- term go for huge fuel consuming vehicles which is a risk in future given a case where the prices may hike due to low supply and increased demand for gasoline. It is important therefore if the consumer purchases a fuel-efficient vehicle which will not have much effect even when the gasoline prices rise unexpectedly.

For the decision whether to buy a used or a new vehicle, the gasoline prices have more influence on used vehicles. Consequently, purchasing anew vehicle is more resourceful.  Smaller vehicles are efficient for consideration when purchasing a new car since gasoline prices will have less impact compared to purchasing larger more consuming vehicles. (Castilla, & Haab, 2013).

Discuss the following in regard to your household at the time of your purchase

When purchasing the car, I was employed during that time. The economy then was growing at a stable rate.Most of the people do not take into consideration the fact that they may lose their jobs if by any chance recession occurred before they were able to clear their loan. In this case, I was among the victims of such cases. I did not think about what might happen if it happens I lost my job and I had no backup plan as well.

Evaluate the financial trade-offs when making your purchase.

Tradeoffs in simpler terms are the sacrifices one has to make in order to purchase another better product or service(Ostrom, & Iacobucci, 1995). When buying my new car, I had to make some sales in order to be able to afford the car. Even though it dint cover the whole cost. I had to sell my old car so that I could purchase this new one. I also had to sell my old television set so as to top up on the cash. This was able to take care of some cash for purchasing the new car. The maintenance cost was not too high but I obviously had to cut my budget a little so as to cater for the finances needed for the maintenance as well as the payment of insurance services.

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Discuss the influence of any of these Federal or state level programs on your decisions to purchase a vehicle

The state-supported car ownership programs that have been brought forth bring encouragement to the people who are wishing to purchase vehicles.  Transportation is in most cases considered as a barrier to employment. Most people who face transportation challenges find it hard to maintain as well as even find employment (Clifton, 2004). This is mostly for those who live in the rural areas. These are places that face a hardship in the transportation sector as public transport is limited or at times none at all. In this case, car ownership turns out to be the most effective and efficient way to move about. Over years, research has showed that the people who own cars are more likely to stay in employment for longer period. The state has come up with several programs that has allowed the low-income families to benefit with the transport issues.

These programs include the reimbursements, transportation allowances as well as the contracts for buses as well as other transportation services (Clifton, 2004).  This at times also involve the assistance with the purchase of a vehicle as well as car maintenance programs. These services and assistants are provided for many states. Most states have recognized the importance of car ownership as a means to meet the needs of the low-income families. They have thus come up with programs to help them in the purchase and maintenance of their vehicles.

Explain the influence of environmental factors such as emissions & health concerns on your decision

Generally, my old car used to have very high fuel consumption and its emissions were a little bit too pronounced. This used to be so irritating not only for me but also to the public. At most times someone would follow me to a petrol station and give a kind advice that I should service my car. The sound it produced when in motion was also quite irritating. These are some of the things that pushed me to getting a new car. I was faced with charges of pollution severally especially for the emissions as well as the sounds. This led me to find another car as fast as I could.

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Discuss the ways in which your purchase illustrates one piece of circular flow models of economic activity.

The circular flow follows a certain pattern. This is Production, Income, Expenditure, and Production again. This model represents the monetary transactions in the market economy (Schumpeter, 1934). The flow involves two things. This include the flow of the physical things (goods and labor) and flow of Money (the use of monetary services to purchase the physical things). In the circular flow model, my purchase makes a representation of the expenditure which is the third level of the model. This is because after earning the income, I utilize it by spending on the vehicle. The other parts include the production, where the product in manufactured, the income stage where the person intending to purchase the vehicle received the income most probably from their employer. The expenditure stage is the stage where the person makes a purchase on what they wish to buy(Schumpeter, 1934). This money then goes back to the production process and the cycle continues.

Develop a conclusion about the economy’s influence on personal and business decision making such as purchase, investment and so forth.

The power of purchasing as well as investment is influenced by income. The amount of income you earn will determine how much you will be able to invest in or to purchase. The prizes of goods also have an influence on your purchasing ability. The supply, demand as well as competition will affect the prize of a commodity and thus this has a direct impact on the expenditure. The opportunity cost is another factor. The limited resources including time and money affect the purchasing power. For example, If a third of the salary is used in the purchase of a vehicle, the person may end up being left with nothing to invest. If this investment does not double in its value in the coming years, then that would mean that the commodity’s opportunity cost will be twice its initial value in the next year.

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