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

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? 2

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 3

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 4

Personalize Name some items you could purchase today that would be worth less in one year… 5

Please create a list Pros and cons of buying a used v. a new car. 6

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 7

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. 8

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. 9

edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside LineMobileHelpInside 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 Again, highlight the new information on this car, and select Print

True cost of ownership edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside LineMobileHelpInside Line 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

True cost of ownership edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside LineMobileHelpInside Line Question 2: How much could you save over five 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

True cost of ownership edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside LineMobileHelpInside Line 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

True cost of ownership edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside LineMobileHelpInside Line 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?

True cost of ownership edmunds.com Welcome, Guest Sign In Facebook Sign in Account Mobile Help Inside LineMobileHelpInside Line 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 – Kelley Blue Book – Edmunds – NADA – 18