owning & operating a vehicle
DESCRIPTION
Owning & Operating a Vehicle. Choosing a Vehicle. 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 - PowerPoint PPT PresentationTRANSCRIPT
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?
AssignmentAssignment
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.
AssignmentAssignment
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.
AssignmentAssignment
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