1. UNIT 3 GETTING YOUR FIRST CAR
True Cost of Ownership

2. Standard 3.1
Analyze and apply multiple sources of financial information when making financial decisions about automobile purchases.

3. Lesson Goals I can identify the costs of owning a car
I can distinguish the cost difference between purchasing a new and used car

4. Do You Remember (DYR) – Do Now
Depreciation was discussed in the
Buying a Used Car Lesson (Standard 3.1)
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
Depreciation is the largest cost factor by far.
Depreciation is a vehicle's loss in value over a defined period (due to wear and tear). Some vehicles depreciate faster than others because of oversupply, limited appeal, or rebates on similar new models.

5. Quick Check:
You buy a new car for $24,750. What is the value of the car once you drive it off of the lot? (Assume 25% Depreciation)

6. Do You Remember (DYR) Insurance (discussed in Car Insurance Lesson – Standard 3.3)
Insurance costs vary depending on many factors, including your age, location, and driving record. And they can dramatically boost the ownership costs of models that otherwise would seem affordable.
For example, if you're looking for a fast car on a budget, steer clear of sports cars such as the Subaru Impreza WRX STi.
Insurance can run three times as much as the fun and agile but cheaper to own Mini Cooper S. Overall
Insurance makes up about 10 percent of total ownership costs over five years.

7. Quick Check:
Spencer has an insurance policy costing her $3,900 per year. She has a minor accident and a speeding ticket that results in a 25% surcharge in insurance costs?
What is her new premium? $_____________

8. Finding the True Cost of Ownership
The goal of this part of the lesson is to understand what expenses are associated with owning a car.
We call this the True Cost of Ownership.
Our True Cost of Ownership is comprised of six main factors.
You will need to include these additional expenses in your car ownership planning.
The first two were covered in previous lessons:
Depreciation
Insurance

9. Taxes & Fees
Includes:
Title Fee - $60 - $85 (Based on NJ MVC)
Registration Fees - $35 - $84 Per Year (Based NJ MVC)
Sales Tax
Sales tax costs owners about as much as maintenance and repair does.
New Jersey Sales Tax is 7% of Total Sales

10. Quick Check:
Mona is thinking about buying a car that costs $19,000. Additionally, she knows she needs to pay 7% New Jersey sales tax and her Title and Registration Fees of $375.
What is the total amount she needs to pay at the time of purchase?
$1,300
$13,300
$20,300
$20,705
Cannot be determined with information provided

11. Interest
Interest is tied directly to vehicle price. The higher the interest, the more the loan will cost you. (More on interest in the Credit Unit). We use the average interest rate of 6.0 percent.

12. FUEL Fuel costs can really add up (especially for SUVs.)
To calculate fuel costs, we assume the vehicles are driven 12,000 miles a year
the average reported by respondents to a Consumer Reports annual survey
On average, fuel is the second-largest cost of vehicle ownership.
MPG – Miles Per Gallon
To that we apply the national average price of $4.00 a gallon for regular gas.

13. Calculating Fuel Costs
For example, your car gets 28 miles per gallon at $4 per gallon.
You plan to drive about 12,000 miles per year.
12,000 miles per year / 28 MPG =
Gallons * $4 p/gallon =
$1,714.29

14. Your Turn: Your car gets 30 miles per gallon at $4 per gallon.
You plan to drive about 12,000 miles per year.
___________ miles per year / ________ MPG = ______ Gallons * $_________ p/gallon
= $_________________
Show your Number Sense here:

15. Maintenance and Repairs
Maintenance and Repairs is an ongoing expense due to wear and tear.
The majority of the costs are covered by the factory warranty during the first few years.
Maintenance Includes (but is not limited to)
Oil Changes – Every 3,000 to 5,000 miles
Tune-ups – Every 3,000 to 100,000 miles
Tires – Every 30,000 to 50,000 miles

16. Quick Check:
You are thinking of buying a used car. Insurance will cost approximately $1,800 per year, maintenance and repairs will cost approximately $400 per year, and gas approximately $4 per gallon (the car gets 32 miles per gallon). You plan to drive about 12,000 miles per year.
What will be the approximate cost (all costs included) for the year?
a. $2,200
b. $2,575
c. $3,700
d. $4,400
e. $5,200

17. Your Turn: You are thinking of buying a used car.
Insurance will cost approximately $2,200 per year, maintenance and repairs will cost approximately $500 per year, and gas approximately $4 per gallon (the car gets 30 miles per gallon).
You plan to drive about 15,000 miles per year.
What will be the approximate cost (all costs included) for the year?

18. DO NOW: Shopping for a New Car vs. a Used Car True Cost of Ownership
It is always exciting to buy a car that is new to you. Even though a 2014 model sounds enticing it is important to use websites, such as Edmunds.com to compare the True Cost of owning a new car vs. a used car. The next slide is an example from Check out the savings!

19. What is your savings for each category for a 2014 Hyundai Elantra Sedan vs. a 2011 model?
5 Year Total for the
2014 Car
5 Year Total for the 2011 Car
Difference
Total Cash Price
(To Purchase)
$21,665
$12,126
$9539
Depreciation
$10,217
$5,629
$4,588
Insurance
$18,329
$14,801
$3,528
Taxes & Fees
$1,780
$1,025
$755
Interest (Financing)
$1,702
$1,003
$699
Fuel
$8,608
$8,341
$267
Maintenance/Repairs
$3,672
$4,975
$(1303)
True Cost to Own
$44,308
$35,774
$8,534