Owning & Operating a Owning & Operating a VehicleVehicle

Choosing a Vehicle

Making a Decision Usually your first major

financial decision.

You need to be knowledgeable to make an informed decision.

Buying a car takes time, effort and research.

Some factors to consider before purchasing a vehicle include:

Price Style Gas Consumption Maintenance Costs Reliability Safety Resale Value Insurance Rates

Cost Considerations

Remember to include the taxes! All cars purchased at a car dealership are subject

to both PST and GST. Private sales of used vehicles are only charged

PST.

Most people need a loan to buy a car Remember that a car loan is considered bad debt!

Total monthly debt repayments should not be more than 40% of your net income.

Example

If your monthly net income is $1,200.00 what is the maximum monthly debt repayment you can afford?

What is the minimum monthly net income that is needed if you wish to take a loan with monthly payments of $600.00?

Example

A new SUV is purchased from a dealership in St. Boniface for $45,000.00. What taxes are paid?

What is the total paid?

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p. 139 #1 – 9

Purchasing a New VehiclePurchasing a New Vehicle

Purchasing a New Vehicle The cost of a vehicle is not the same

everywhere. Different dealerships will charge different

amounts for the same car.

It is very important to shop around and to negotiate your price.

Costs in a Purchase

Manufacturer’s Suggested Retail Price MSRP or Sticker price Includes:

Standard equipment basic equipment that comes with the car

Optional equipment extras already installed on the vehicle Examples

Air conditioning $1000 - $2000 Automatic transmission $1000.00+ Power locks and windows

May be offered separately or as a part of a package.

Costs in a Purchase

Freight Delivery of the vehicle to the dealership

Tire tax

Excise charges on the air conditioning unit

All taxes

Finding the Money Trade-in allowance

Amount of money the dealer will give you for your current vehicle

Subtracted from purchase price before taxes are added.

Loans Deferred payment.

Total you pay when you finance the purchase

Finance charge. Difference between the deferred payment and the total

purchase price is the

Example

You have found a two-door convertible you would like to purchase.

Base price of the car is $25 880 Optional equipment

Preferred equipment package group costing $1260 Four speed manual transmission costing $995 AM/FM stereo with CD player costing $200.

Air-conditioning excise tax of $100 $149 documentation fee $14 tire tax Freight charge of $620.

Example

You receive a trade in allowance on your old vehicle of $5000, and have managed to save $6000 as a down payment.

You will need to finance the rest Your bank has agreed to lend you the money at 8

¼% for 3 years.

Example

Calculate: MSRP

Purchase price

Monthly payment

Deferred payment

Finance charge

Assignment Assignment

Module 5 Lesson 1

Leasing a VehicleLeasing a Vehicle

Leasing a Vehicle

Based on the idea that you pay for the amount a vehicle's value decreases during the time you're driving it. Only what you use!

At the end of the lease you have the option of returning or buying the car.

Leasing Terminology Lease Term

length of the lease in months

Residual Value predicted value of vehicle at the end of the term

Residual Value Rate the rate used to determine the residual value

Lease Interest Rate: the interest rate charged by the leasing company

Depreciation the drop in the value of the vehicle over the term of the lease.

Leasing

Cons Pay a penalty to end a

lease early Charged for extra

kilometres Charged for ‘excessive’

wear and tear No ownership at the end

of the lease term

Pros Little or no down-

payment Smaller monthly

payments More $ in your pocket

Always driving a new vehicle

You do not have to sell or trade your used car

Lease Payments A lease payment is made up of three parts

Depreciation payment Interest charges Taxes

Other fees… A security deposit

refunded if you return the vehicle in good condition Gap protection

Insurance Paid in case you write off the vehicle during the time when you

owe more on the vehicle than Autopac will pay.

Example - Part 1

A minivan sells for $28,500 and leases for $479 per month plus tax for a lease term of 24 months. A down payment of $3275 is required. The guaranteed residual value of the vehicle is 65% of the sales price.

Example - Part 1 Calculate the total monthly leasing payment

Calculate the total amount paid by the end of the lease.

Calculate the total residual value of the minivan, including tax.

Calculate the total cost of the vehicle if it is purchased outright at the end of the lease.

Example - Part 2

You are unable to pay for the minivan outright at the end of the lease, and arrange for a three year car loan at a fixed rate of 6%.

Example - Part 2 Calculate the monthly payment on the guaranteed residual value.

Calculate the total amount paid by the end of the loan.

Calculate the total amount paid for the minivan if you finance the residual value.

Example - Part 3

Instead of leasing the minivan, you decide to purchase it. You are able to get a 5-year car loan at a rate of 6%. A down payment of $4,000 is required.

Example - Part 3 Calculate the total purchase price of the minivan

without financing it.

Calculate the monthly finance payment of the minivan.

Calculate the deferred finance payment of the minivan.

Options

Lease + purchase outright =

Lease + finance purchase =

Purchase outright =

Finance purchase =

AssignmentAssignment

Module 5 Lesson 2

Vehicle DepreciationVehicle Depreciation

Vehicle Depreciation

The value that a car loses as you drive

Different cars have depreciation rates

Generally… 20%-30% in the first year 10%-15% every following year

Resale value The amount it is worth after a set time has gone by.

Example

A new car is sold for $35,000. The depreciation rate is 20% the first year, and 15% each additional year

Calculate the depreciation and the car’s resale value at the end of the first three years.

Find the total depreciation of the vehicle.

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p. 168 #1 - 4

Purchasing a Used VehiclePurchasing a Used Vehicle

Used Vehicles

Can be purchased from dealers or privately Dealerships are easier

Look after all the mechanical check-ups Pay taxes for you Generally results in a higher price

Private sales can be much less expensive Require you to do the work.

Private Sales

Have a signed written contract Include

All terms and conditions of the sale Any reassurances the vendor gives you

“That warning light is always on… I had it checked out and there is no problem…”

Conduct a lien search Tells you if there is a claim against the vehicle by

someone the current owner owes money.

Private Sales

Check over the vehicle carefully Take the car for a test drive and have it inspected

by a mechanic you trust! If the vendor doesn’t want this done, there is probably a

reason!

Ask to see the “Safety Inspection” Required in Manitoba

completed by a qualified mechanic Vehicle cannot be registered without one

Private Sales

Check the history of the vehicle Get the VIN number

Vehicle Identification Number Small metal tag under driver side windshield

Call MPI to see if the vehicle has ever been in an accident

Use Carfax Online tool that will check the cars history

Calculating the Cost

Dealership All costs are already built into the price Add on both PST and GST

Private Sale Gets a little complicated Different taxes charged on different parts of the

price…

Private Sale Costs

Asking Price? The money you pay to the vendor.

Will any diagnostic work or repairs need to be done on the vehicle? Cost + PST +GST

Book Value? PST charged on this amount

Private Sale Cost

Safety Inspection? $40.00 + GST

Lien search? $3.00, no tax.

Find the total

Example 1

Gordie wants to buy a used car from a private owner.

The asking price is $1995, and the car has a book value of $2500.

Gordie needs to do a lien search. He has a diagnostic test done for $30, and finds out that

the car needs some engine work, $650. The car has not had a Safety Inspection.

How much will this car cost Gordie?

Example 2

Les Munny goes to a reputable dealer in town to buy his car. The dealer has a car he likes for $5500. How much will this car cost him?

AssignmentAssignment

Assignment 3

Owning a VehicleOwning a Vehicle

Fuel Economy

Fuel Economy

Amount of fuel needed to drive a set distance litres per 100 Km. divided into city driving and highway driving

Listed on the window sticker

Calculate fuel economy by tracking odometer readings between fill-ups.

Examples A car requires 40L of gasoline to fill the tank. If the

cost of gasoline is 98.5¢/L, calculate the cost to fill the tank.

You fill up your car at the gas station and get a bill for $36.50, how much gas did you purchase?

Examples

You leave for a weekend at the lake, and find your odometer reading to be 012862.8. When you get back to the city it has a reading of 013639.7, how far did you drive over the weekend?

Examples

A car with a full tank of gas travelled 572km before stopping at a gas station. If the car requires 41.2L of gas to fill the tank, find

the fuel economy of the car. Find the cost of fuel per 100km if the cost per litre

was 98.5¢.

Examples One week you track all the driving you do and find

you drove a total of 350km in the city, and 200km on the highway. Your car has a fuel economy of 10.5L/100km in the city and

7.4L/100km on the highway. Gasoline costs 98.5¢/L.

Calculate the how much fuel you used, and the cost of the fuel.

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Page 146 #1-11

Owning a VehicleOwning a Vehicle

Maintenance

Maintaining a Vehicle

All vehicles require maintenance neglect leads to long term major problems

no oil = seized engine

New cars under warranty 2-3 years cost of all reasonable repairs covered

Older cars need more maintenance and repairs at some point repairs start to out-value the vehicle

Maintaining a Vehicle

Cost of service depends on parts cost, labour cost and taxes Parts GST and PST GST only on labour

Garages have different labour and parts costs Dealerships have higher priced parts and labour, but have

a good reputation. Private mechanics can be cheaper, but you need to trust

them.

Example 1 Jane took her car to a

shop for servicing. The oil and the oil filter were changed, and new wiper blades were installed.

4 litres of oil

$2.05/L

1 oil filter $5.60

wiper blades

$14.75

The time required to service Jane’s vehicle was 0.6 hours. The shop rate for labour was $59.00 an hour. How much is this service going to cost Jane?

The costs for parts were as follows;

AssignmentAssignment

Assignment 6

Owning a VehicleOwning a Vehicle

AUTOPAC

Vehicle Insurance

Autopac provided by Manitoba Public Insurance Corporation (MPIC)

Crown Corporation (owned by Provincial Government)

Not-for-profit organization

Basic Autopac consists of… Basic All Perils Coverage

Covers accidental loss or damage to your vehicle Accidents and theft

Personal Injury Protection Plan Covers costs you may incur from injuries or death

Basic Third Party Liability $200 000 of coverage for claims made against you for

damages your vehicle causes to someone else Their vehicle and/or injuries

Optional Autopac

Extra insurance protection is available to Add extra third party liability

$200,000 is not very much money if you injure someone! Up to $5, 000, 000 available

Reduce your deductible

Provide you with a rental car in case your car is not usable.

Factors affecting the Cost Where you live

Territory 1 Winnipeg

Includes St. Norbert, Headingley, East/West St. Paul

Territory 2 All areas south of 53rd parallel except Territory 1

Selkirk, St. Andrews, Brandon, Dauphin and South Manitoba

Territory 3 All areas north of the 55th parallel

Thompson, Lynn Lake, Churchill and North Manitoba

Territory 4 Everything in between 2 & 3

Flin Flon, The Pas, Grand Rapids

Factors affecting the Cost What you use your vehicle for

All-purpose passenger vehicle Used for pleasure driving, commuting to and from work

or school, and for business purposes.

Pleasure Passenger Vehicle Limited business use; commute only 4 days per month

(work or school), but can be used to drive dependent children to school

Factors affecting the Cost Your Vehicle

Make, Model, and Year

Engine Size, Passenger Protection Features (airbags)

Immobilizer Installation

Cost to repair your vehicle Based on CLEAR

Canadian Loss Experience Automobile Rating developed to group cars and vans. Collects data about vehicles in accidents, the damage done

to them, and the cost to repair

Factors affecting the Cost Your Driver Safety Rating (DSR)

Position on a scale with 36 levels. (-20 to +15) Your level depends on your driving record.

One level up each year you drive safely Each at-fault accident lowers you by five levels. Traffic Convictions vary:

not obeying a traffic sign: two levels down impaired driving: 10 levels down leaving the scene of an accident: 10 levels down criminal negligence in the operation of a vehicle causing

death: 15 levels down

Finding Autopac Premiums Can be done using paper tables and charts…

Now all computerized so best option is internet! www.mpi.mb.ca

AssignmentAssignment

Module 5 Lesson 6

ReviewReview

Module 5