Total cost of ownership for a personal vehicle

Compare the total cost of ownership for the purchase of two personal vehicles of your choice (use two that are currently for sale!). One vehicle should be a new car, while the second should be a used car that would serve as a reasonable substitute for the new car (i.e. don't compare a Civic and Tahoe... you don't have to compare the same exact vehicle model, but make sure they are in the same 'class').

What costs should you include? Maintenance/repairs, motor vehicle taxes, insurance, fuel... plus anything else you believe is relevant. This is going to require extra research, including things such as miles per gallon calculations, typical maintenance/repair needs, average insurance costs, and local motor vehicle tax information.

Also consider how long you expect your ownership period to be... will you drive the vehicles until they fall apart? Or will you trade it in after several years? Regardless of which you choose, you should estimate a salvage value at the end of your ownership period (again, this salvage value estimate will require some research into expected resale values).

3.Provide a description of vehicle #1, a new car. Calculate its total cost of ownership, being as detailed as possible in your costs.

Jeep Cherokee Trail Hawk

List Price $30,029

Sales tax: 5%

Interest rate 3.71% for 36 months

MPG: 26 current gas rate $2.33 currently drive 900 miles a month, would need 34.6 gallons a month = $80.62

Tank size: 15.8

Annual insurance: $1500

Annual repair: $400

Sales tax: 5% 1501.45

Monthly payment: 926.84

Total loan amount $31530.45

Total interest cost 1835.88

All in cost: 33,366.33

Vehicle depreciation over life of loan: 14,353.67

Gas annually: 967.44

Annual insurance: 1500

Repair: 400

Annual payment: 11122.08

Registration: 317.29

Calculate the Net Present Value of this series of cash flows using a discount rate of 4%.

Calculate the Net Present Value of this series of cash flows using a discount rate of 7%.

4.Provide a description of vehicle #2, a comparable used car. Calculate its total cost of ownership, being as detailed as possible in your costs.

Certified Pre-Owned White Kia Sorento

Total Price: 24,000

Drivetrain AWD

Miles - 44,000

MPG: HWY - 25

Tank size: 18.8 gal

Current gas rates: $2.33, $44 to fill tank, currently drive 900 miles a month, would need 36 gallons a month = $83.88

Interest rate - 4.11% 36 months

Sales tax - Iowa dealership 5%

Limited warranty: 12 month /12,000 mile

Warranty deductible $50

Monthly car payment including sales tax and interest rate of 4.11 at loan term of 36 months: 745.24

Loan amount including tax: $25,200

Total interest cost: $1,628.57

TOTAL COST OF CAR LOAN including interest and sales tax: $26828.57

Drive off lot depreciation: 10%

Annual Depreciation: 15%

Depreciation over life of the loan: $10,734.90

Vehicle value/ equity at end of loan: $13,265.10

Annual registration: $256

Insurance: $1013 annually

Gas: $1056 annually

Calculate the Net Present Value of this series of cash flows using a discount rate of 4%.

Calculate the Net Present Value of this series of cash flows using a discount rate of 7%.

5.REACTION: Discuss your two options below. Which seems like the better financial decision? Explain, explain, explain...