Math 21 Earning and Spending Money
Book 5: Major Purchases
Name: ______________________________
Start Date: ______________
Completion Date: ________________
Book 5: Math 21 Earning and Spending Money- Major Purchases
Edited April 2015
Year Overview:
Earning and Spending
Money
1.
2.
3.
4.
5.
Budget
Personal Banking
Interest
Consumer Credit
Major Purchases
Home
6.
Scale Drawings &
Ratios
7. Area & Volume
8. Angles
9. Triangles
10. Slope & Elevation
Travel and Transportation
Recreation and Wellness
11. Travel Project
12. Puzzles & Games
13. Understanding
Statistics
14. Budgeting
Recreation
Topic Overview
You may have already entered the workforce and have some knowledge
about earning and spending money. The intent of this theme is to help you be
aware of financial decision making that you face. In this section, you will create
a budget and have a deeper understanding of different expenses you will face.
Outcomes
Overlapping Outcomes in Credit
M21.1 Extend and apply understanding of the preservation of equality by solving
problems that involve the manipulation and application of formulae within
home, money, recreation, and travel themes.
M21.8 Demonstrate understanding of budgets
Theme Specific Outcomes
M21.10 Demonstrate understanding of financial decision making including
analysis of renting, leasing, and buying on credit.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
Edited April 2015
Contents
Topic Overview.................................................................................................................. 2
Outcomes ....................................................................................................................... 2
Overlapping Outcomes in Credit ........................................................................... 2
Theme Specific Outcomes....................................................................................... 2
Glossary of Terms ........................................................................................................... 4
5.1 Housing Costs .............................................................................................................. 5
A. Renting Your Home .................................................................................................. 5
B. Buying Your Home ..................................................................................................... 6
Discuss the Ideas ........................................................................................................ 7
5.2 Vehicle Costs ............................................................................................................... 8
A. Buying a Used/Pre-owned Vehicle ........................................................................ 8
Discuss the Ideas ........................................................................................................ 8
5.2A Practice Your Skills - Buying a Used/Pre-owned Vehicle ............................ 9
B. Leasing or Buying a New Vehicle ......................................................................... 10
Discuss the Ideas ...................................................................................................... 11
5.2B Practice Your Skills – Calculating Lease Costs ............................................ 12
5.2B Practice Your Skills – Calculating a New Vehicle Purchase ..................... 14
Show What You Know - Buying vs Leasing A Vehicle................................................ 16
C. Vehicle Expenses .................................................................................................... 18
Variable Costs .......................................................................................................... 18
Fixed Costs ................................................................................................................ 19
Student Evaluation .......................................................................................................... 21
Learning Log .................................................................................................................... 23
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Glossary of Terms
budget
an estimate of expected incomed and expenses
collateral
security pledged for the repayment of a loan
credit
the ability for someone to purchase something and pay for it over time
credit limit
the hightest amount of money one can charge to a credit card
credit rating
an evaluation of your past use of credit, your character, your ability to repay,
and the security or collateral you have for a loan
dependent
people living with you who depend on you for support
fraud
when someone steals information in order to access your money
installment plan
a way of paying for large items where a consumer pays a down payment to
the store or financing company, and then pays regular payments over a
period of time
interest
the charge for borrowing money, or the benefit paid you to lend it
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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5.1 Housing Costs
People choose to rent or buy a home for many different reasons based upon
their situation. There are many aspects to consider:
•
•
•
•
•
•
Personal and financial goals;
Personal values, needs, and wants;
Amount of money available for housing costs;
Real estate prices;
Location preference;
Expected length of stay in a particular place.
A. Renting Your Home
Rent is the cost of using someone else’s property. Examples of property choices
include apartments, condos, houses, mobile homes, etc. A tenant, or renter, is a
person who rents the property. The owner of the rental property is the landlord.
The landlord is responsible for collecting rent and deposits, paying utility bills,
performing repairs and maintenance, watching over the property, responding
to tenant complaints, assigning new tenants, etc.
When moving into a new place, people are usually required to pay a security
deposit and sign a lease. A security deposit is an advance payment to cover
anything beyond normal wear and tear on the unit. This deposit may be
returned to the tenant when the unit is left in good condition. A lease is a legal
contract between the tenant and the landlord specifying the responsibilities
and rights of both parties.
Advantages of renting include:
•
•
•
•
•
Low move-in costs;
Fixed monthly expenses;
Easy to move;
Less maintenance and repair work;
Less expensive than home ownership;
Disadvantages of renting include:
•
•
•
•
Rent may change with little notice;
Restrictions on noise level and/or pets;
Fewer opportunities to upgrade apartment (i.e. new carpet, paint, or
wallpaper);
When leaving a property, no equity is returned as it would be if selling a
home;
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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•
May lose rental if the property is sold.
B. Buying Your Home
Home ownership means the buyer has purchased a housing unit as property.
Buying a home is a significant investment and is a major financial decision.
To purchase real estate, many people
apply for a mortgage. A mortgage is
a home loan in which the real estate
is the collateral. Collateral is an item
promised to the lender if the borrower
does not pay back the loan. The
three main components to a
mortgage are the amount borrowed,
the interest rate, and the length of the
loan.
Advantages of home ownership include:
•
•
•
•
•
•
Build equity which can be borrowed against if necessary;
Pride of ownership;
Stable mortgage payments;
Improvement of buyer’s credit rating;
Property may increase in value;
Free to make home improvements and have pets
Disadvantages of home ownership include:
•
•
•
•
•
•
•
Large down payment;
Move-in costs;
Insurance costs;
Possible for property to decrease in value;
Time, money, and energy commitment;
Repair and maintenance costs;
May take several months to sell a home if trying to relocate.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Discuss the Ideas
For each of the following situations, circle RENT, BUY to indicate your opinion
related to this person’s housing decision. Explain why you have made each
decision.
1. Marla, age 22, plans to work full time while completing her college degree in
a nearby city.
 Rent
 Buy
Reasoning
2. Bill, age 44, travels out of town frequently for his sales job. His company may
transfer him to another sales territory within a year or two.
 Rent
 Buy
Reasoning
3. Craig, age 32, recently completed his master’s degree in business while
working at the same company for the past six years. He has also been able
to save nearly $8,000 over this time period.
 Rent
 Buy
Reasoning
4. Jess, age 19, has just taken her first job as a sales representative trainee for a
computer software company.
 Rent
 Buy
Reasoning
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Book 5: Math 21 Earning and Spending Money- Major Purchases
Edited April 2015
5.2 Vehicle Costs
Credit is often needed to purchase large items, such as vehicles and housing.
Loans may be through banks or financing companies. Interest rates may be
different based on the type of home or vehicle purchased, the seller involved,
and the credit rating of the purchaser.
There are many places to find new and used homes, or new and used vehicles.
Where might you look for a used car? Where might you look for a new home?
A. Buying a Used/Pre-owned Vehicle
Tina wants to buy a used van for her business. Should she buy the van from a
dealer or from a private seller?
•
•
Tina knows that one advantage of buying
a used vehicle is a lower price. The vehicle
would have depreciated while the other
people owned it.
One disadvantage of buying a used
vehicle is that you cannot be certain of its
condition. It might need repairs.
GST is not charged on used
vehicles bought privately in
Canada. PST is not
charged on used vehicles
bought in Saskatchewan.
Discuss the Ideas
1. Which seller would likely offer a lower price?
2. Which seller would be more likely to offer a warranty?
3. What advice would you give Tina?
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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5.2A Practice Your Skills - Buying a Used/Pre-owned Vehicle
1. Rayleene is getting a loan to buy a used car from a seller on Kijiji. The price of
the car is $8200.00. She has a down payment of $500.00 and is able to
negotiate an interest rate of 5% from her bank. Rayleene is trying to decide
whether to get her loan for 3 or 4 years.
a. Use an online personal loan calculator to fill in the following table to
help her decide:
Amount of Principal
Interest Rate
Length of Loan
3 year loan
4 year loan
Monthly Payment
Total Payments
(Monthly Payment x # of months)
Total Cost of the Loan
(Total Payments – Principal)
b. Should Rayleene take her car loan out for 3 or 4 years? Why?
2. Gary is buying a used car from a dealership for $15,499.00 so needs to pay
both GST and PST. His down payment is $3000 and he is approved for a 4.75%
loan.
a. Use an online personal loan calculator, fill in the following table:
Purchase Price
GST
PST
Total Purchase Price
Amount of Principal
Interest Rate
Length of loan
3 year loan
5 year loan
Monthly Payment
Total Payments
(Monthly Payment x # of months)
Total Cost of the Loan
(Total Payments – Principal)
b. Should Gary take his car loan out for 3 or 5 years? Why?
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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B. Leasing or Buying a New Vehicle
When you lease a car, you do not own it. You enter
into a long-term rental agreement that allows you to
use the car but you must return it at the end of the
lease, unless you choose to buy it. When you return a
leased car, you do not receive any money back from
the owner.
Buying or leasing a car is a big decision, and you
should figure out the cost difference before choosing,
as sometimes buying is a better option and sometimes
leasing is a better option.
Along with a
monthly payment
there may be extra
fees for kilometers
driven over a set
mileage and
charges for any
damage that
occurs to the
vehicle.
When looking for
a vehicle there are many options
available to you to pay for it. The
following table describes some
of the advantages that exist
for leasing or buying.
Advantages of Leasing
Advantages of Buying
The down payment and monthly
payments are lower than when buying
a car.
When the payments are made, you
own the car. If you lease you have to
give the car back.
You can lease a nicer car then you
can afford to buy.
You can drive as much as you like. If
you lease there may be a limit and you
may have to pay for extra kilometers
over the limit.
If you do not like the car you can lease
a different car when your lease expires.
If you do like it you can buy it after the In most cases leases are more
lease.
expensive than buying over a long
period of time.
If you cannot afford to keep the car
you can sell it. When you lease you are
committed to the contract you signed
for the agreed upon amount of time.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Discuss the Ideas
Would you lease or buy in each situation? Why?
1. You want to drive a new vehicle every few years.
 Lease  Buy Reasoning
2. You want to be able to sell the vehicle later.
 Lease  Buy Reasoning
3. You want to have the lowest possible monthly payment.
 Lease  Buy Reasoning
4. You want to be able to drive long distances.
 Lease  Buy Reasoning
5. You are unable to save up a large down payment.
 Lease  Buy Reasoning
6. You want to be free from car payments eventually.
 Lease  Buy Reasoning
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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5.2B Practice Your Skills – Calculating Lease Costs
1. Jocelyn plans to lease a car for the next three years.
• She will pay a down payment of $2500.
• There are 36 monthly payments of $305.95.
What is the total cost of the three year lease?
2. Jeannie is turning in her car at the end of her lease.
a. The lease says that she can drive 40 000km and she has to pay $.10 for
each extra kilometer.
o She actually drove 44 247km.
o What is the charge for the additional kilometers?
b. She also has to pay $535.00 for paint and body repairs, and $75.00 to fix a
chip in the windshield.
o What is the total cost for all of these extra charges?
3. Aaron’s has a 2 year lease.
• He will pay a down payment of $1800.
• There are 24 monthly payments of $245.
• He can drive 60 000km and he has to pay $0.14/km for each extra
kilometer.
o He actually drove 68 448km.
o What is the charge for the extra kilometers?
•
He also has to pay $225.00 for repairs and $535.00 for new tires.
What will the total cost of the lease be after the two year time period is up?
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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4. Marian as decided to purchase her car after her 3 year lease is done.
• She paid $350 per month for 4 years.
• She paid a down payment of $3000.
• Her final payout to buy the car is $6500.
What was the total amount that Marian paid for her car?
5. Jeff has driven his truck for 4 years and put many kilometers on it over the
allowable amount. He is trying to decide whether he should buy his truck
once his lease is up, or pay the mileage penalty. He also discovers some
body damage that needs to be repaired. What advice would you give him?
• Jeff is driving a 2010 Ford Super Duty F350 XLT.
• He has driven 156,000 km in his 4 years. Jeff’s lease allowed for 100,000
km. Each extra km costs $0.08.
• Jeff has been told he needs to purchase a new windshield at a cost of
$450.00.
• To buy this truck out, he needs to pay an additional $30,000.
Should Jeff pay the penalties and turn his truck into the dealer, or buy the
truck at the end of his lease? Give your reasoning.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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5.2B Practice Your Skills – Calculating a New Vehicle Purchase
1. Breanna is planning on buying a new car. The base price is $18,455.00, but
there are extra charges she has to pay.
Extra charges
Extended warranty
Security package
Delivery charge
Freight
Federal air conditioning tax
$1489
$1250
$750
$400
$100
a. What is the total vehicle price before taxes?
b. What is the total amount that Breanna will need to pay after taxes?
Remember that new vehicles need to pay both PST and GST.
2. Jesse is buying a new car. The base price is $25,340. Jesse has a down
payment of $3500.
Extra charges
Delivery charge
$650
Freight
$425
Federal air conditioning tax
$100
a. What is the total vehicle price before taxes?
b. What is the total amount that Jesse will need to pay after taxes?
Remember that new vehicles need to pay both PST and GST.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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c. What is the total price of the car after taxes and less the down payment?
(This is the amount of the loan Jesse needs)
d. Jesse pays for his new car with a personal loan from his bank. His loan is 5%
over 3 years. How much interest will Jesse pay? (Use an online loan
calculator to help you.)
e. What is the total cost of the car? (Remember to include the down
payment in the cost)
f. What are some things that Jesse could do to reduce amount he pays at
the end of the loan?
3. Some people pay cash for a new vehicle. Other people finance all or part of
the cost with a loan.
a. What would be an advantage and disadvantage of paying cash?
b. What would be an advantage and disadvantage of a loan?
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Show What You Know - Buying vs Leasing A Vehicle
1. Tyler is a contractor in Winnipeg and needs a new truck for his business. The
total purchase price is $29 300.45. He has $5000 saved for a down payment.
He needs to decide whether he should buy or lease his vehicle. When you
buy or lease a new vehicle you need to pay Federal and Provincial sales tax.
Buying Option:
 The loan for the purchase prices plus taxes must be repaid in 48 monthly
payments of $695.49 plus the down payment.
Leasing Option:
 There are 48 monthly payments of $390.25 plus taxes plus the down
payment.
 The purchase price at the end of the lease is $14 100.
a. What is the total cost to buy the truck?
b. What is the monthly lease payment including taxes?
c. What is the total cost to lease for 4 years?
d. What is the cost to buy the truck at the end of the lease?
e. How much will Tyler have spent in total if he buys the truck after the four
year lease?
f. What would you suggest Tyler do and why?
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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2. Erica wants a car. She found one that she wants to buy or lease that has a
purchase price of $12 400. She has saved up a down payment of $1200. She
wants low monthly payments because she is also paying off a student loan.
Buying option:
•
The loan for the purchase price must be repaid in 48 monthly payments of
$290.00.
Leasing option:
•
•
There are 36 monthly lease payments of $185.00 including taxes.
The purchase price at the end of the lease is $8600.00.
a. What is the total cost to buy the car?
b. What is the total cost to lease for 3 years?
c. What is the cost to buy the car at the end of the lease?
d. How much will Erica have spent in total if she chooses to buy the car at
the end of the lease?
e. What do you think is the best option for Erica? Why?
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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C. Vehicle Expenses
Whether you buy a new or used, there’s more to the cost of your vehicle than
the purchase price. Fuel, maintenance, depreciation—all kinds of factors add to
your total cost of ownership. Since transportation is an average household’s
second largest expense, it makes sense to get the full picture of what you’re
spending each year to keep your vehicle on the road.
There are two main kinds of costs associated with your vehicle:
Operating Costs: These are variable, meaning they do change
depending on where you live, how you drive, how often you’re on the
road, and what you spend on service and repairs.
Ownership Costs: These are fixed, meaning they are normally stable from
month to month. They include insurance, license fees, registration fees,
taxes, finance costs and depreciation. Fixed costs may differ from vehicle
to vehicle and place to place.
Variable Costs
Gasoline: To determine gas cost per kilometre, fill up your gas tank and take
note of the kilometre reading on your odometer. On your next fill-up divide the
cost of your fill-up by the distance you have driven. This is your gas cost per
kilometre. For example, if it costs you $50.00 to refuel and
you drove 500 kilometres since your last fill-up, your gas cost
per kilometre is 10 cents.
Maintenance: Proper maintenance affects the life of your
vehicle, your fuel economy and your
safety. Avoiding repairs and
maintenance will cost you in the form of
extra depreciation. The best way to determine your
maintenance costs is to keep a record of expenses. If you
haven’t kept a record, estimate these costs at an average of
3.27 cents per kilometre driven ($0.0327)
Tires: How and where you drive affects your tire costs
significantly. High speeds, low tire inflation, hard cornering,
rapid acceleration and quick stops all contribute to fast tire wear. The average
tire wear and tire cost per kilometer is about 1.86 cents. A new set of tires can
cost up to $968.96.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Fixed Costs
Insurance: Basic car insurance is included
in your plate registrations in
Saskatchewan. You can find an estimate
for your plate registration fees on
the www.sgi.sk.ca website under the
Basic Plate Calculator. You can chose to
pay for your plate registration as a
monthly payment or in one lump sum per
year. If you choose to pay monthly, there is a financing fee added to your
registration fee.
License, Registration and Taxes: In addition to basic plate insurance, many
people choose to buy additional insurance for their vehicle. This is called a
Package Policy. You can find out how much a package policy might be using
the https://equote.sgicanada.ca/products/autopak website. You not only need
to register your car, you also need to consider the cost of your driver’s license. If
you have one, what is the cost of your license right now?
Depreciation: Depreciation is the difference between what you paid for your
vehicle and its eventual selling price. To determine your annual depreciation
expense, subtract the estimated trade-in value of your car from the purchase
price and divide by the number of years you expect to own the car. A good
way to estimate trade-in value is to study used car ads.
For example:
A new 2014 Honda Civic Si has an asking price of
$31,000. To predict the depreciation on this vehicle
over 5 years:
Looking at values of 5 year old Honda Civics, their
selling price is
•
•
•
2009 – Honda Civic Si $13,900
Original asking price was $21,000.
This depreciated $7900 in 5 years, or $1420 per
year.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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5.2C Practice Your Skills – Car Insurance
1. Using the Basic plate calculator at http://www.sgi.sk.ca/ to find the yearly
cost of insurance for the following cars. Assume you have a safety rating
of 5 for each case. Once you have the yearly cost, calculate how much
you insurance would be per month for each.
a. 2013 BMW Convertible 135I Cabriolet
b. 1993 Toyota truck T100 Reg Cab 2 WD
c. 2007 Ford Focus ZX5 4DR Hatchback
d. Choose three cars that you think you may want to lease or purchase in
the future and record the basic plate costs.
2. Go to https://equote.sgicanada.ca/ and get a free quote for a package
policy on three vehicles of your choice. This is extra insurance on top of
your regular plate insurance.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Student Evaluation
Insufficient
Evidence (IE)
Developing (D)
Growing (G)
Proficient (P)
Exceptional (E)
Student has not
demonstrated the
criteria below.
Student has rarely
demonstrated the
criteria below.
Student has
inconsistently
demonstrated the
criteria below.
Student has
consistently
demonstrated the
criteria below.
Student has consistently
demonstrated the criteria
below. In addition they
have shown their
understanding in novel
situations or at a higher level
of thinking than what is
expected by the criteria.
Proficient Level Criteria
IE
D
G
P
M21.1 Extend and apply understanding of the preservation of
equality by solving problems that involve the manipulation and
application of formulae within home, money, recreation, and travel
themes. [WA10.1 and WA20.1]
b. I can describe, using examples, how a given formula is used with
money.
c. I can create, solve, and verify the reasonableness of solutions to
questions that involve a formula.
e. I can solve, with or without the use of technology, questions that
involve the application of a formula that:
• does not require manipulation
• does require manipulation.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Proficient Level Criteria
IE
D
G
P
E
IE
D
G
P
E
M21.8 Demonstrate understanding of budgets. [WA20.6]
c. I can research the costs of expenses (e.g., bus pass, rent, phone,
electricity, power, groceries) to create and justify a personal
budget.
i. I can create a monthly transportation budget that involves the
fixed costs (e.g., licence fee, insurance) and variable costs (e.g.,
maintenance, fuel) of owning and operating a vehicle.
Proficient Level Criteria
M21.10 Demonstrate understanding of financial decision making
including analysis of renting, leasing, and buying on credit. [FM30.1
and WA30.6]
h. I can calculate, using technology, the total cost of a compound
interest loan from various institutions (e.g., banks, payday loans)
under a variety of conditions (e.g., different amortization periods,
interest rates, compounding periods, and terms).
i. I can compare renting, leasing, and buying of large cost items and
explain reasons for considering each choice.
j. I can determine the costs related to renting and buying housing.
k. I can research and present various options for purchasing or
leasing a vehicle (oral, written, multimedia, etc.).
l. I can justify a decision related to buying, leasing, or leasing to buy
a vehicle, based on factors such as personal finances, intended use,
maintenance, warranties, mileage, and insurance.
m. Solve, with or without technology, questions that involve the
purchase, lease or lease to purchase of a vehicle.
n. Collect and interpret information about the procedures and costs
involved in insuring a vehicle (e.g. car, motorcycle, snowmobile)
and the factors affecting insurance rates (e.g. gender, age, driving
record, model of vehicle, use of vehicle), and compare the
insurance costs for different vehicles.
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Book 5: Math 21 Earning and Spending Money- Major Purchases
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Learning Log
Date
Starting Point
Ending Point
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