The Dave Car…

The True Cost of Ownership

The True Cost of Ownership– Pick a new car to research– Use a search engine to find the “true cost to own”.

www.edmunds.com\tco.html– Use the same car but 2 years older

The True Cost of Ownership• Jeep Wrangler Unlimited New TCO=$49,572

• Jeep Wrangler Unlimited 2-years old TCO=$47,966

Year 1 Year 2 Year 3 Year 4 Year 5

Depreciation 5943 2339 2058 1824 1635

Insurance 2165 2241 2319 2400 2484

Taxes/Fees 2534 180 162 147 147

Fuel 2441 2514 2589 2667 2747

Maintenance 169 725 422 1861 374

Year 1 Year 2 Year 3 Year 4 Year 5

Depreciation 7489 1730 1522 1349 1211

Insurance 1962 2031 2102 2176 2252

Taxes/Fees 1790 127 114 103 103

Fuel 2441 2514 2589 2667 2747

Maintenance 358 1799 361 779 505

The True Cost of Ownership

• Cost per mile to drive new– TCO = $49,572– 5 years @ 15,000 miles = 75,000 miles– $49, 572 75,000 = .66 per mile

• Cost per mile to drive 2 year– TCO = $47,966– 5 years @ 15,000 miles = 75,000 miles– $47,966 75,000 = .63 per mile

The True Cost of Ownership

• Savings on a two-years-older model– $49,572 - 47,966 = $1,606 savings

• Savings in percentage for each category

Savings new = .xx * 100 = xx%

New 2 Year Savings Percentage

Depreciation 13,799 13,301 498 3.6%

Insurance 11,609 10,523 1086 9.35%

Taxes/Fees 3,170 2,237 933 29.43%

Fuel 12,958 12,958 0 0%

Maintenance 3,551 3,802 -251 -7.06%

Chapter 4• Drive Free

– Pick a goal car you would like to have in 20 months– Use a search engine to find used cars. www.cars.com works

but you can use a different one.• Start with a used car you could pay cash for $1,500, then a

mid-priced about car and then the goal car.• Assume you pay yourself and SAVE the $400-$450 you

would have paid for financing a car. (450*10 months = $4,500)

• Sell each car for the same amount you purchased it for.• Create a document/timeline of the entire 20 months. On this

timeline, the following needs to be included for each car purchase:»» Purchase date(s)»» Picture of the cars(3)»» Purchase price(s)»» Number of months required for savings»» How you saved that much money

Drive Free?

Example

• Goal car – 2002 BMW Roadster Convertible will be $10,000

• 1st car should cost about $1,500• Average car payments are $450 per month so that goes in savings

(we won’t worry about interest but it would earn interest)• Sell each car for the amount purchased in 10 months (we won’t

calculate depreciation but it would depreciate)

• 1st car – 1994 Ford Mustang--$1,500– Save $450 a month for 10 months=– $4,500 + 1,500 for selling the Mustang = $6,000

Example

• 2nd car $5,000 Mazda Miata– (I had $6,000 to spend)– So I have $1,000 left in the car savings account

Example• 2nd car $5,000 Mazda Miata

– (I had $6,000 to spend)

• Keep saving $450 per month for another 10 months:– $4,500 savings per month– 5,000 from selling the Miata– 1,000 left from before (didn’t spend all my profit)– 10,500 saved!

• Goal car – 2002 BMW Roadster Convertible!!!

Example• Keep saving $450 per month for another 10 months:– $4,500 savings per month– 5,000 from selling the Miata– 1,000 left from before (didn’t spend all my profit)– 10,500 saved!

– Now I can afford the Goal Car WITH CASH!

• Goal car – 2002 BMW Roadster Convertible!!!

Example

• Keep saving $450 per month for another 10 months:– $4,500 savings per month– 5,000 from selling the Miata– 1,000 left from before (didn’t spend all my profit)– 10,500 saved!

• Goal car – 2002 BMW Roadster Convertible!!!