The Financial Guide for Post-Secondary Students - continued

Transportation

How to get around

Transportation plays an important part in a post-secondary student's independence. Without transportation, how can you socialize, explore and discover the joys of student life? There are many different transportation choices available to you, depending on where you live. In order to help you analyze your options and make the best decisions, please read the following while keeping your personal situation in mind. Transportation decisions can be separated into several small choices that arise from one big decision: to buy or not to buy a car.

Buying or leasing a vehicle is a major expense. You must know your needs well and evaluate if purchasing a vehicle is one of them. Determine if a vehicle is so important that you are willing to sacrifice a good portion of your financial resources for one.

Buying a vehicle

Before making your decision, create a budget

Financing

Once you have decided to buy a vehicle, you have a number of decisions to make. The first step in purchasing a vehicle is not choosing the colour, the engine or the tire size. First and foremost, you must prepare a financial plan to determine what you can afford.

There are various ways to finance your vehicle purchase. The different options can even be combined to maximize the available resources. Here are some examples: 

• Personal contribution:  savings, scholarships, gift money, etc.
  
• Instalment plans:  When the dealership or individual selling you the vehicle allows you to pay in several payments. In order to take advantage of instalment plans, it is preferable to have a fixed income in order to ensure timely payments.
  
• Credit, car loan:  You can get a loan application from your financial institution. If you do not have a past credit file, someone else may have to co-sign. This means that if you miss a payment, this person will become responsible for the debt. Dealerships often offer loans with a lower interest rate than banks. Both have their own regulations concerning the guarantee of payments.
  
• Line of credit:  This is a form of a credit limit already established (e.g., $5,000) that you use through your bank account (when it does not have the necessary funds). You use it whenever you like, therefore, it does not have a specific purpose and a predetermined payment schedule. In general, a line of credit has a lower interest rate than credit cards. It is possible to pay the interest only or to pay a fixed or variable amount.

Note:  Credit purchasing and a line of credit allow you to spread out the payback, but interest increases the total amount of the purchase. Remember that until the vehicle is paid for in full, the bank, the dealership or a collection agency can seize the vehicle if you miss a payment.

Additional costs to consider

When the time comes to decide what portion of your budget you want to dedicate to your vehicle, you have to look beyond purchase or lease prices. There are numerous additional costs that some students forget to include in their calculations. To minimize potential problems, take the following factors into consideration before buying or leasing a vehicle.

• Insurance:  This is the biggest extra expense to purchasing a vehicle. What's more, premiums for people under the age of 25 are generally a lot higher. However, certain insurance companies look for a clientele that will be loyal to them for years to come and offer reduced prices for students.
  
  It is very important to shop around to find the best premium and the best plan for you. Consult your parents' insurance company but do not hesitate to check out several Internet sites, make calls, get different appraisals. Insurance companies are fighting with each other for your business, so even if insurance rates are generally high, you can still find adequate coverage at a reasonable price.
  
• Licence:  The annual fee for an automobile licence and registration depends on the province or territory you live in.
  
• Maintenance:  This also represents a considerable expense. It includes oil changes, regular tire rotation, brake replacement, muffler and battery maintenance, etc. Under environmental protection regulations, every vehicle is now subject to an emissions test, at the owner's expense.
  
• Gas:  Nowadays, you have to take the increasing price of gas into consideration. It represents a major expense that is unavoidable when you own a vehicle.
  
• Parking:  Parking can be another major expense unless you have the luxury of having parking included with your rent or if a friend lends you a parking space at his/her place. Parking can range from $25 to $100 per month, depending on the area and city you live in.
  
• Unexpected costs:  It is always wise for a car owner to keep a provisional fund. Put a certain amount of money aside each week or every month for unexpected expenses that could occur. You cannot predict accidents, tickets, vandalism, etc. So it's good to have a safety net to avoid a financial mess.

Re-evaluate:  Do you really want to invest this kind of money in a vehicle and risk getting into debt or missing out on other activities related to student life?

Three ways to get wheels

Before you start shopping, make a budget by taking all expenses into consideration, and know your price limit. It is very important to remain under that price limit and to avoid the temptation of getting a vehicle or an offer that is attractive but is too expensive for you.

Compare the advantages and disadvantages of buying a new car versus a used car, and examine the option of leasing. The age and the ownership of a vehicle have a huge impact on the price, the maintenance costs and the market value.

You have three choices or ways to buy a vehicle: purchasing a new car, leasing a car or buying a used car. Examine these options, then evaluate which one is best for you from a comfort and financial point of view.

New vehicle

Remember that a car is not an investment. Quite the contrary — it is a depreciating asset. The instant you leave the dealership with your new car, it loses 10% of its value. During the first year, it will depreciate by approximately 30%!

In addition, people are rarely able to purchase a new car with cash — even fewer students are able to do so. You must take a considerable loan over a relatively long period of time with interest rates that will only increase the total cost. Also, remember that insurance premiums are higher for new cars because of the high repair costs in case of accidents or vandalism.

The advantages are that you get a car that is most certainly in good condition and you have the luxury of getting a guarantee from the manufacturer for a certain period of time. Once paid, you own the vehicle and you can benefit from it as much as you like until it is damaged or until you decide to sell it. You will have a means of transportation and some equity, but it is a costly expense to undertake during your studies.

• Where to look:  The only place you can go to buy a new car is at a dealership. It is very important to visit many places in order to find the best vehicle and the right price for you. Try out the vehicle on the road, and before making your choice, make sure that you feel at ease with the car.

Leasing

Leasing requires that you only pay the depreciation of the vehicle. At the end of the lease, you return the vehicle. The owner (the dealership) can than sell it and retrieve the remaining value of the car and you have no more payment obligations up until you decide to buy a car or lease another one.

At the beginning of the lease, the dealership takes the value of the vehicle and calculates the depreciation it will sustain during the term of your lease contract. What is left is called the remaining value of the vehicle. The calculated wear is then distributed in equal monthly payments throughout the term of the contract, which is usually of about 36 or 48 months.

Beware! The depreciation is calculated on a normal-usage basis. The lease agreement indicates the average number of kilometres that you are allowed to travel in a year. Every additional kilometre will result in extra charges. Most dealerships charge $0.12 per kilometre. For example, if you are allowed to 20,000 km per year (60,000 km for three years) and you travel 25,000 km per year (75,000 km in three years), you will pay an additional $1,800 charge.

The big advantages of leasing are that you get a new car and you can take advantage of the manufacturer's guarantees without having to pay the price of a new car.

The disadvantages are that you are not the owner of the vehicle and you do not own the car at the end of the contract. In addition, if you were not careful about the mileage, you can find yourself paying a heavy additional charge.

• Where to look:  Again, leasing is available through car dealerships. Shop around! Do road tests, and even wait for sales since these are fairly common for car leases.

Used vehicles

When we think of used cars, we sometimes think of a rusty car on the verge of breaking down. It is true that cars like these exist, but today's used cars are often very reasonable and even nearly new. Choosing a used car is often the best choice for a student because it is so much more affordable than a new car. You will also save on insurance premiums. You can purchase a car that is almost new without having to meet the depreciation cost. Remember that a vehicle loses 30% of its value after just one year.

Here are some justifications for used cars: 

Thanks to regulations and standards concerning safety and environment, among others, used cars are now more trustworthy than they once were.

Some are still protected by the guarantee of the manufacturer.

With communications technology, you can easily retrace a car's history to make sure that you are the lawful owner.

Many dealerships offer lower financing rates for used cars.

Negotiations are often done in a more friendly and less stressful manner when you buy from an individual. You must however take extra precautions when dealing with an individual.

1. Verify that you are dealing with the true owner.
   
2. Have the vehicle thoroughly inspected by a certified and independent garage.

No matter who you buy a vehicle from, always conduct a road test and make sure that you are very comfortable with your choice. It is your money and it will be your responsibility. Get an opinion from someone who knows about cars. Don't let yourself be pressured and don't make forced decisions.

• Where to look:  Visit used car dealerships. At new car dealerships, ask about formerly leased vehicles; they are still fairly new and not as expensive.

  Consult the classifieds for sales by individuals. There are also flyers created especially for selling used cars.

  Note:  There is more room to negotiate, so take advantage of the situation to make a well-informed decision that is best for you.

The alternatives

There are numerous alternatives to getting a car. The biggest advantage is that none of them require a major financial commitment on your behalf. Here are the most popular examples: 

Public transportation

If you are lucky enough to live in an area that offers public transportation, you have a great advantage. Whether you take the bus or the subway, public transportation is often easy to access and is available at a low cost. Schedules are often posted on the Internet, so you can set your schedule. It's a great way to get around, and it's much cheaper than owning a car.

Car pooling

Car pooling is an effective alternative to public transportation. Several Web sites have been set up to help you find car pooling opportunities. These sites include databases of people offering car pooling services. Use a search engine on the Internet to find a site for your area. The following Web site is an example of sites that provide car pooling services for Canadians: www.carpooltool.com/en/my

Cycling, inline skating and walking

For those who live close to their most common destinations or for those who enjoy being outside, cycling, inline skating and walking are the cheapest and healthiest ways to get around.

Occasional car rental and taxis

Not buying a vehicle means that you will not have fixed payments and the financial responsibility of taking care of a vehicle. In theory, this means that you should have money to occasionally take a taxi or to rent a vehicle for a few days.

Would you like to learn more?

• Use the Lease or Buy Calculator for vehicles on Industry Canada's Office of Consumer Affairs' Web site at: www.consumer.ic.gc.ca/spending
  
• Visit the Automobile Protection Association at: www.apa.ca
  
• To learn more about driving costs, visit the Canadian Automobile Association at: www.caa.ca/e/automotive/driving-costs.shtml
  
• For a comparison of the cost of buying a new versus a used vehicle, visit: www.desrosiers.ca/pdfs/2002/2002-12.pdf

Complain!

Very few consumers complain when they are dissatisfied. However, companies now know how much customer satisfaction is important. You have everything to gain by expressing your dissatisfaction in an attempt to obtain compensation.

Did you know? As many as 96% of unsatisfied customers do not complain.

Step 1: Contact the salesperson

Contact the salesperson, retailer or business when you have a complaint about the goods or services that you bought.

• First, give the merchant a chance to solve the problem.
  
• If there is a complaints department in the establishment where you made the purchase, use it. If not, talk to someone in authority, such as a manager. A face-to-face discussion is best. Be firm and businesslike, but polite. Calmly and accurately describe the problem and what you want the company to do to solve it.
  
• Request specifics as to how and when something will be done, and get the person's name in case you will have to refer to this conversation later on. Write down any details of your complaint and keep it in a file. Make sure that your notes are dated.
  
• If a personal visit does not produce satisfactory results, write a letter (see sample letter below) to someone higher up, such as a general manager or the owner. Provide all the details of the problem, the efforts you made to resolve it, and tell him or her what you want. Send a copy to the manufacturer, and be sure to keep a copy of your letter.

Step 2: Contact the headquarters

If you still have a problem, ask for the telephone number of the company headquarters and contact the customer service department.

Step 3: Contact government offices and consumer organizations

If that does not work, contact the government offices and consumer organizations that apply to your situation. If you do not know where to start, call the government office of consumer affairs where you live. For a complete list in your area please visit the Canadian Consumer Handbook at www.consumer.ic.gc.ca/handbook

Step 4: Take legal action

Taking legal action should be your last resort. However, if you decide to sue, remember that there are often time restrictions on filing lawsuits. You may wish to check with a lawyer about any statutes that may apply to your case.

Among possible legal actions, there is small claims court and class action lawsuits.

Practical Tips

• Always keep a file of important information. Include the sales receipts, repair orders, warranties, cancelled cheques, contracts and any letters you have written to or received from the concerned company.
• Don't wait. You may lose your money or your right to claim damages if you wait too long.
• Always check the exchange or the return policy before you buy.
• If you have any problems with your financial institution, contact the Financial Consumer Agency of Canada at: 1-866-461-3222. All federally regulated financial institutions, such as banks, are required to have in place a complaint handling process. This process is designed to achieve a resolution to diputes occurring between consumers and their financial institutions.

Sample complaint letter

Source: Canadian Consumer Handbook

Tools

The Canadian Consumer Information Gateway offers a tool called the “Complaint Courier” to guide you through the complaint process. Check it out at www.complaintcourier.ca

Fraud

Credit card fraud totalled about $200 million in Canada in 2003, according to the RCMP. Debit card fraud is not far behind at about $150 million per year and thieves are becoming very creative. This type of fraud affects us all. This section will give you a good idea of the different types of fraud to look out for and practical tips to avoid being a target.

Did you know? In 1998, law enforcement organizations and other organizations received over 10,000 complaints about telemarketing fraud.

Types of fraud

Here are some of the different types of fraud to look out for: 

• false advertising
• fraudulent telemarketing
• multi-level marketing and pyramid schemes
• deceptive business practices
• fraudulent electronic commerce
• mail fraud
• counterfeit money

Here are some products or services frequently used by thieves: 

• loans for prepaid expenses
• pseudo-contests
• working from home
• fraudulent magazine subscriptions
• credit file cleaning
• false weight loss programs

Consumer tips

Be aware of the most common signs of fraud. Walk away from offers that seem too good to be true, because they usually are. Toss out the mail or hang up the phone when you see or hear the following: 

• Sign now or prices will increase.
• You have been specially selected…
• You have won…
• All we need is your credit card (or bank account) number for identification purposes only.
• All you have to pay for is postage, handling, taxes…
• Make money in your spare time — guaranteed income.
• Be your own boss! Never work for anyone else again. Just send in $50 for your supplies and…
• A new car! A trip to Hawaii! $2,500 in cash! Yours, absolutely free! Take a look at our…
• Your special claim number entitles you to join our sweepstakes.
• We just happen to be in your area and have toner for your copy machine at a reduced price.

Remember the smart consumer always looks at the total price and checks out the credibility of the company and the product before buying.

Stay away from telemarketers who want to do the following: 

• Send a courier for your money.
• Send money through electronic channels.
• Automatically withdraw money from your chequing account.
• Offer you a free prize but charge you shipping and handling fees.
• Ask for your credit card number, chequing or savings account number, social insurance number or any other personal information.
• Get payment in advance, especially for employment referrals, credit repair or providing a loan or a credit card.
• Have you join a pyramid or multiple sales scheme.

Did you know? Some credit card issuers offer “zero liability” on unauthorized transactions.

Security Tips

Credit cards, automatic teller machines and direct payment can be very practical. However, do not forget that there is occasional fraud with these services. To avoid being a victim, follow these tips: 

10 good ways to protect your credit cards

These may seem like simple tips. But, remember that by ignoring them, you are only encouraging the illicit use of your cards.

1. Never leave your credit cards unattended at work. Many credit cards are stolen at the workplace.
   
2. If your credit card gives you access to an automatic teller machine, protect your personal identification number (PIN) or secret code. Memorize it; do not keep it on a piece of paper.
   
3. Never leave your credit cards in your car's glove compartment. Many credit card thefts are committed in motor vehicles.
   
4. Every time you use your card, make sure it is your card that is handed back to you after payment.
   
5. During trips, always keep your cards on you or in a safe place.
   
6. If your card is lost or stolen, immediately notify the issuer. Most credit card fraud cases occur a few days following the actual loss or theft of the card.
   
7. Sign your cards as soon as you get them. Also, do not forget to destroy cards that you no longer need in order to prevent anyone else from using them.
   
8. Make a list of your credit cards and their numbers. This information is important when reporting lost or stolen cards.
   
9. Always verify your monthly statements. Make sure that all the transactions were made by you.
   
10. Never reveal your card number by phone unless you are dealing with a reliable company. Watch over your credit cards like you watch over your cash.

10 security tips for direct payment and Automatic Teller Machines: 

1. Review your bank booklet and your bank account statements regularly in order to spot any missing or additional transactions. Notify the bank of any error immediately. An error could be a sign that your account is being skimmed.
   
2. Your debit card (your ATM card) gives you access to your bank account(s). Keep it in a safe place and do not lend it to anyone under any circumstances, not even to friends or relatives.
   
3. In order to complete a debit transaction or to use an ATM, you must have your debit card and your personal identification number (PIN). Your PIN is your electronic signature. Avoid writing it down anywhere. Memorize it!
   
4. When choosing your PIN, avoid using information that is too obvious such as your name, your phone number, or your date of birth.
   
5. Under no circumstances should you divulge your PIN. An employee of a financial institution, a police officer or a shopkeeper will never ask you for your PIN. You are the only person who must know it.
   
6. Do not complete an ATM transaction unless you feel safe. Otherwise, postpone your transaction or go to another teller window.
   
7. To complete an ATM transaction, form a screen with your hand or body. This will prevent anyone from seeing you enter your PIN.
   
8. After an ATM transaction, do not forget to take your card and receipt, if applicable. If you complete an ATM withdrawal, count your bills and pocket them immediately. Notify the bank of any error.
   
9. If your card is lost, stolen or held by an ATM, immediately advise your financial institution. Most financial institutions offer a 1 800 telephone service or 24 hour service for these requests.
   
10. Thefts at an ATM are very rare. However, should this happen to you, do not forget that your safety always comes first. Always inform the police and your financial institution of the incident.

Would you like to know more?

• To protect yourself from debit card fraud, visit Industry Canada's Office of Consumer Affairs' Web site at www.consumer.ic.gc.ca/debitfraud
  
• For information on identity theft, visit www.cmcweb.ca/idtheft
  
• To test your vulnerability to fraud take the Fraud Quiz in the problems and complaints section of Consumer Connection www.consumer.ic.gc.ca
  
• Visit the Royal Canadian Mounted Police (RCMP) Web site: www.rcmp-grc.gc.ca . This site describes most recent scams, counterfeiting and telemarketing fraud.
  
• For more information or to report telemarketing fraud, visit the PhoneBusters Web site: www.phonebusters.com
  
• The Financial Consumer Agency of Canada (FCAC) offers some tips on how to protect yourself from unauthorized credit card transactions. FCAC also offers some tips to consumers who are victims of unauthorized credit card transactions. To learn more, please consult the guide entitled Credit Cards and You, under “Publications”, in the FCAC Web site at: www.fcac-acfc.gc.ca. You may also receive a free hard copy of this publication by calling the FCAC, free of charge, at: 1-866-461-3222.