Vehicle Finance - Part #4Buying a Used Vehicle

Warm UpAaron helped a neighbor for 1 1/4 hours on Monday, 50 minutes on Tuesday, from 8:20-10:45 on Wednesday morning, and a half hour on Friday. He is paid $13.25 per hour. How much did he earn for the week?

Add two numbers to the following set of numbers to make the mean 15 and the median 8

3, 4, 17, 8, 39, 10, 2, 3, 71, 14

Evaluate: {2+5 x [(-2) - (-7)]} ÷ (-9)

Buying a Used Vehicle

a new vehicle depreciates by about 30% of its original value during the first year of ownership, therefore when you buy a 1 year old used vehicle you will pay approximately 70% of the new cost

when buying used you can save a fair bit of money, but you must also be careful when you are purchasing used, you may think of the term “buyer beware”

just as there are many factors to consider when you purchase a new vehicle, there are many to consider when you purchase a used vehicle

Factors to Considerthings that you need to do before buying a used vehicle

Lien Search - is a search for claims on the car by a creditor (maybe the car owner used the car as security for a debt)

Certificate of Inspection - ensures that the vehicle conforms to regulations governing safety, emissions, or both. In Manitoba this is known as a safety inspection and it is required to transfer the title of a vehicle.

Factors to ConsiderCertificate of Inspection - The safety inspection on a used vehicle cannot be more than one year old. This certificate will cover: brakes, windows, tires, lights, exhaust system, seatbelts, turn signals, horns, other components and systems related to safety

Diagnostic Test - either at a dealership or at the garage of a certified technician, this test will be completed to determine the quality of the vehicle and whether or not it will require repair work. This will include: engine, transmission, suspension, body (for evidence of accidents) and the exhaust system

Factors to Consider

before purchasing a used vehicle you should also be aware of its book value, that is the average monetary value for a specific year, make, and model of a vehicle is worth

this would be roughly what you can expect to pay for the vehicle depending on its condition

Buying Used From a Dealership

if you purchase a used vehicle through a dealership, there are no extra costs involved, they have the responsibility to do a lien search, and safety inspection.

if you buy a used vehicle from a dealership, you have to pay both GST and PST on the price of the used vehicle

Buying Used from a Private Seller

Calculating the total cost of a used vehicle from a private seller can be more difficult, you have extra charges to take into consideration.

If a vehicle is bought privately in Manitoba, you only have to pay PST at the time of insurance

Taxes When Purchased Privately

Item PST GST

Price of VehiclePST on the greater of

the book value or selling price

no GST

Lien Search no PST no GST

Diagnostic Test PST GST

Safety Inspection no PST GST

Repairs PST GST

ExampleA man goes to a popular dealership in Winnipeg to buy his car. The sticker price for this used vehicle is $7800. How much will this vehicle cost him?

ExampleJade wants to buy a used vehicle. At a dealership, Jade finds two used vehicles that she likes. The first vehicle is a $4,500 sedan and the second is a $5,000 SUV

Calculate the total purchase price of the sedan

Calculate the total purchase price of the SUV

Recalculate the total cost of each vehicle if she chooses to have a $50 diagnostic test done on both of them.

Example

Gordon lives in Winnipeg. He wants to buy a used car privately for $1995. Gordon does a lien search for $26 and asks a mechanic to do a diagnostic test for $30. The mechanic tells him that the car needs some engine work that will cost $650 including labour. The book value of the car is $2500. He also needs to get a safety done on the vehicle before he can register it, a mechanic tells him it can be done for $50. How much will this car cost Gordon?

ExampleOliver is considering purchasing a used automobile from a private owner. The owner is asking $3,900 for the vehicle. The lien search costs $4, the diagnostic test costs $45. The technician tells him that some transmission work is needed which will cost $1,200. The seller has just recently obtained a safety inspection.

Calculate the total price Oliver will pay for this vehicle if the book value of the automobile is $3,400.

Calculate the total price Oliver will pay if the book value of the automobile is $4,200.

ExampleKori is looking for a vehicle. She is considering two vehicles. One of the vehicles she is considering is from a dealership. The dealership is asking $3,500 for the used car. The second car is from a private owner and they are asking $2,995. The lien search on the car is $5 and the diagnostic test is $30. The technician tells her that some engine work is needed which will cost $875. The safety inspection will cost her $40 and the book value of the car is $3,500

Calculate the total cost of the vehicle from the dealership

Calculate the total cost of the vehicle from the private seller