Economic Analysis of Brand New Car VS. Second Hand Car
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Transcript of Economic Analysis of Brand New Car VS. Second Hand Car
COMPARATIVE ECONOMIC ANALYSIS OF A
BRAND NEW CAR VS. SECOND HAND CAR
A Paper Presented to:
Engr. Bernard Capellan
In partial Fulfillment of the Requirements in
Engineering Economy
Presented by:
Gicom, Angelica F.
Featuring
TOYOTA VIOS 1.5 G M/T
Brand New 2015 Toyota Vios 1.5 G M/T
Price: P 845,000 Body Type: Sedan Fuel Type: Gasoline Seats: 5 Transmission: Manual Doors: 4
ECONOMY & ENVIRONMENT
Fuel Type: Gasoline
Fuel Capacity: 42 L
Combined CO2 Emissions: 147.0 g/km
Combined Fuel Consumption: 6.3 L/100 km
Range: 667 km
ENGINE
Size: 1.5 L
Displacement: 1,497 cc
Number of Cylinders: 4
Number of Valves: 16
Transmission: 4-Speed Automatic
Second Hand 2012 Toyota Vios 1.5 G M/T
Price: P 420,000 Body Type: Sedan Fuel Type: Gasoline Seats: 5 Transmission: Manual Doors: 4
Excellent Running Condition Super Cool aircon
All power Very efficient fuel
All original With alarm,Key less entry
100% not Flooded DVD,CD,Stereo, Aux
Well maintained Complete papers
Dual airbag
Table 1.0
Initial and Annual Costs of a Brand New and Second Hand Toyota Vios Car
Brand New Car 2nd Hand Car
INITIAL COST
Down Payment/ Purchased Amount 422,500 420,00
Registration - -
Insurance - -
ANNUAL COST
Amortization 269,724/yr -
LTO Registration 2,700/yr 2,000/yr
Comprehensive Insurance 25,000/yr 20,000/yr
TPL Insurance 950/yr 950/yr
Maintenance Cost 5,000/yr 20,000/yr
Fuel Cost 14,000/yr 17,000/yr
Table 2.0
Cost breakdown of owning and running a brand new car
INITIAL COST
I. Down Payment 422,500
Based on 50% down payment
II. Registration FREE
III. TPL Insurance FREE
ANNUAL COST
IV. Amortization 269,794
Based on 24 months of amortization
V. Registration 2,700
VI. TPL Insurance 950
VII. Comprehensive Insurance 25,000
VIII. Maintenance Cost 5,000
IX. Fuel Cost 14,000
Based on 2015 Toyota Vios fuel efficiency: 15.44km/L
Where: B = Cost Basis R = 0.2 k = Period of depreciation dk = Depreciation Rate
dk* = Accumulated Depreciation
BV = Book Value
Table 2.1
Depreciation Of Brand New 2015 Toyota Vios Car
End of Year B dk dk*
BV
0 845,000 0 0 845,000
1 845,000 169,000 169,000 676,000
2 845,000 135,200 304,200 540,800
3 845,000 108,160 412,360 432,640
4 845,000 86,528 498,888 346,112
5 845,000 69,222.4 568,110.4 276,889.6
Cash Inflow And Outflow Diagram For Brand New Car (2016-2021)
( ) ( ) ( ) ( ) ( )
Amortization
LTO Registration
Third Party Liability Insurance
Comprehensive Insurance
Maintenance Cost
Fuel Cost
Accumulated Cost in a year
Future Worth of the car
Table 3.0
Cost breakdown of owning and running a second hand car
INITIAL COST
I. Purchased Amount 420,000
II. Registration -
III. TPL Insurance -
ANNUAL COST
IV. Registration 2,700 –
2,000 –
V. TPL Insurance 950
VI. Comprehensive Insurance 25,000
VII. Maintenance Cost 20,000
VIII. Fuel Cost 17,000
Based on 2012 Toyota Vios fuel efficiency: 12.34km/L
Table 3.1
Depreciation Of 2nd Hand 2012 Toyota Vios Car
End of Year B dk dk*
BV
0 420,000 0 0 420,000
1 420,000 42,000 42,000 378,000
2 420,000 37,800 79,800 340,200
3 420,000 34,020 113,820 306,180
4 420,000 30,618 144,438 275,562
5 420,000 27556.2 171,994.2 248,0005.8
Where: B = Cost Basis R = 0.1 k = Period of depreciation dk = Depreciation Rate dk* = Accumulated Depreciation BV = Book Value
Cash Inflow and Outflow Diagram of Second Hand Car (2016-2021)
( ) ( ) ( ) ( ) ( )
558,302.92
LTO Registration
Third Party Liability Insurance
Comprehensive Insurance
Maintenance Cost
Fuel Cost
Accumulated Cost in a year
Future worth of the car
CONCLUSION
There are pros and cons of buying both new and used cars. New cars often come with special dealer offers and full warranty,
which means you’re generally covered for repairs and parts if anything goes wrong. On the other hand, used cars are generally cheaper,
but their histories can be difficult to check and you simply don’t know how well it has been treated. Thus, it is essential to check or inspect
the used car first before you negotiate to buy it. You can also take the car to a trusted mechanic for a thorough inspection.
By looking beyond the sale price and considering the total cost of buying a car, you can get a better idea of how much you are
really going to pay for the privilege of being the first owner of your car.
From the results and calculation, the second hand 2012 Toyota Vios is more economical than the brand new one. It is also
observed that depreciation doesn’t happen at a constant rate, the new car loses value fastest the moment you buy it and then it will move
at a constant rate after few years. The brand new car loses 20% of its original price on the first year while the second hand car only loses
10% of its original value.