Unit F: Finance

Summary

Buying and Leasing Vehicles

There are various options to choose from when acquiring a vehicle.

purchasing a new vehicle by paying cash or by financing through the dealership or bank
purchasing a used vehicle by paying cash or financing through the dealership or bank
leasing a new vehicle through a dealership
leasing-to-purchase a new vehicle through a dealership

When a vehicle is purchased, it belongs to the owner.
Vehicles depreciate or lose value over time.
Leasing a vehicle is similar to renting a home.
The period of time for a lease is called the lease term.
If the kilometre allowance is exceeded, the lessee must pay a penalty.
If the lessee wants to return the car before the end of the lease term, there is a penalty.
At the end of the lease, the driver has the option to purchase the vehicle for a residual value.
There are advantages and disadvantages to buying or leasing vehicles.

Payment Calculators

To find the number of payments, use the Number of Monthly Payments Calculator. The principal is in dollars, the interest rate is a percent, and the monthly payment is in dollars.

The Monthly Payment Calculator is used to find the monthly payment. The principal is in dollars, the interest rate is a percent, and the number of payments must be in months.

Financing Loans for Vehicle Purchases and Leases

The principal is the initial amount of the loan.
If a down payment is paid at the time a vehicle is purchased, the loan will decrease by the amount of the down payment.
To find the total cost for a car loan, multiply the monthly payment by the number of monthly payments.

total cost of a loan = monthly payment × number of monthly payments
To find the total amount paid for a car when a down payment is made, use the formula

total amount paid = down payment + loan
To find the amount of interest, use the formula

interest = total cost of loan - initial cost of loan
To find the total cost of a lease, multiply the monthly payment by the number of monthly payments.

total cost of a lease = monthly payment × number of monthly payments
To calculate the price of a vehicle including GST, multiply the cost by 1.05.
In a lease, if the kilometre allowance is exceeded, the penalty is calculated using the formula

penalty = cost/km × extra km driven
Depreciation is calculated by subtracting the current value of the car from the initial cost of the car.