Managing your Personal Finances Unit 2: Getting Your First Car New vs. Used Car 1.

Managing your Personal Finances

Unit 2: Getting Your First CarNew vs. Used Car

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Do Now…

Do things always hold their value?

What would cause an item to lose value over time?

Are there items that might hold their value or actually increase in value over time?

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Remember…

Depreciation – over time a car experiences wear and tear and becomes less desirable to own, so its value decreases. New car loses 25% of its value when

you drive it off the lot A typical four year old car has lost

about 70% of its value

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What other costs are there?

Insurance Taxes/Fees

Title fee - $60 - $85 Sales Tax – 7% of net sales price Registration - $35 - $84 per year

Fuel MPG – miles per gallon

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Personalize

Name some items you could purchase today that would be worth less in one year…

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Please create a list

Pros and cons of buying a used v. a new car.

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What other costs are there?

Maintenance Oil Changes – every 3,000 to 5,000

miles Tune-ups – every 30,000 to 100,000

miles Tires – every 30,000 to 50,000 miles

Repairs Cars have 30,000 parts

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Project: Finding the True Cost of Ownership

Step 1. Think about a car that you would like to own (the MSRP must be <$35,0000). You will need to know the Make and Model number of the car you want to purchase for this project.

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Project: Finding the True Cost of Ownership.

Step 2. Go to Google and type in “True Cost to Own.” Although a number of websites will provide the same information, please select the Edmunds site.

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edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside Line

Step 3. Select Make, Model,

Year (2014) and Style of the car

you want)

Step 4. Check to be sure the cash price is not over

$35,000

Step 5. Then highlight the

information (from car to 5 year

total) and Print.

Step 6. Now, return to search page and select the same Make, Model, Style of the car but change the year to 2012. Again, highlight the new information on this car, and select Print

True cost of ownership


Step 7: Answer the following questions:Question 1:

How much does it Cost Per Mile to drive each car? 2014 Model____________________ 2012 Model____________________

How to Calculate Cost Per Mile:

•Assume you will keep car for 5 years•Assume 15,000 miles per year • Take 5 year total cost of ownership• Divide by 75,000 miles• This will give you Cost Per Mile



Question 2: How much could you save overfive years by buying the two-year old (2012) model?

_____________

How to Calculate Savings:•Take the 5 year total cost of ownership for the new car• Subtract 5 year total cost of ownership for the used car• This will give your savings for buying a used car



Question 3:What is your difference (savings) for year

category? Category 5 Year Total for the

2014 Car

5 Year Total for the 2012 Car

Difference

Depreciation

Taxes & Fees

Financing

Fuel

Insurance

Maintenance

Repairs

Tax Credit (if

any)

True Cost of

Own



Question 4:

In which categories do you see the biggest difference?

If the difference in some of your categories is a negative number, then the new car is cheaper in that category than the used car. How can this happen?



Question 5:

Why isn’t there much change in the other categories? What does that tell you about the older model? (Think about each category and explain why it should be higher, lower or about the same for the used car vs. the new car.)

Resources

Google – www.google.com

Kelley Blue Book – www.kbb.com

Edmunds – www.edmunds.com

NADA – www.nadaguides.com

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Managing your Personal Finances Unit 2: Getting Your First Car New vs. Used Car 1.

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