Question

5. Stephania lives in Broderick, Saskatchewan, and plans to buy a truck. She has two options:

Option A: she can purchase a new truck, with only basic features, for $22 789.00 plus 5%

GST and 5% PST.



Option B: She can buy a 5 year-old truck with approximately 120 000 km on it, but with

many upgraded features, for the same price ($22 789) plus 5% GST (PST is not charged on

used vehicles in Saskatchewan)


a) Calculate how much Stefania would have to pay for each option.



b) Give one advantage and one disadvantage for each option.

Answer 1

Option A:

The GST is the Goods and Services Tax, which is an added value. The PST is the Provincial Sales Tax, which is also an added value. So, the final price for the new truck must included this added values.

`$22,789+5%($22,789)+5%($22,789)\\$22,789+(5)/(100)($22,789)+(5)/(100)($22,789)\\$25,067.90`

So, the new truck costs $25,067.90.

Option B:

We do the same procedure to calculate the final price of the used truck, but this time we don't apply the PST, because isn't a new item.

`$22,789+(5)/(100)($22,789)=$23,928.45`

This means that the used truck has a final cost of $23,928.45

If we compare both options, the new truck costs $1,139.45 more, which is worth it, because it has a complete useful life. On the other hand, the option B offers a truck that has already 5 years old of use, which is not worth, because it's only cheaper by a thousand dollars.

Therefore, it's always better to go for the option A, because it's a new article, with a whole useful life. The only scenario that wouldn't be worth it is in the case that the used item is extremely cheap. However, if Stefania wants a long lasting purchase, not having to go to the mechanic so often, she should go for the new one.