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

ENGINE

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

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

422,500

420,00

INITIAL COST

Down Payment/ Purchased Amount

Registration

Insurance

269,724/yr

ANNUAL COST

Amortization

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
422,500

I.

Down Payment

II.

Registration

FREE

III.

TPL Insurance

FREE

Based on 50% down payment

ANNUAL COST
IV.

Amortization

V.

Registration

VI.

TPL Insurance

VII.

Comprehensive Insurance

VIII. Maintenance Cost

IX.

Fuel Cost

269,794

Based on 24 months of amortization

2,700
950
25,000
5,000
14,000

Based on 2015 Toyota Vios fuel efficiency: 15.44km/L

Table 2.1
Depreciation Of Brand New 2015 Toyota Vios Car

End of Year

dk

dk*

BV

845,000

845,000

845,000

169,000

169,000

676,000

845,000

135,200

304,200

540,800

845,000

108,160

412,360

432,640

845,000

86,528

498,888

346,112

845,000

69,222.4

568,110.4

276,889.6

Where:

B = Cost Basis
R = 0.2
k = Period of depreciation
dk = Depreciation Rate
dk* = Accumulated Depreciation
BV = Book Value

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
2,700
2,000

IV.

Registration

V.

TPL Insurance

VI.

Comprehensive Insurance

25,000

VII.

Maintenance Cost

20,000

VIII. Fuel Cost

950

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

dk

dk*

BV

420,000

420,000

420,000

42,000

42,000

378,000

420,000

37,800

79,800

340,200

420,000

34,020

113,820

306,180

420,000

30,618

144,438

275,562

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)

LTO Registration
Third Party Liability Insurance
Comprehensive Insurance
Maintenance Cost
Fuel Cost
Accumulated Cost in a year
Future worth of the car

(
558,302.92

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 youre 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 dont 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 doesnt 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.