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.