Question

The goal of this assignment is to estimate annual equivalent cost of car ownership.

General outline.

find a price quote for a new vehicle, resale price for the same model, annual maintenance cost and gas expenses;

assume annual mileage to obtain annual gas expense;

time of ownership of two vehicles should not be equal.

Some hints.

you can use www.edmunds.com, www.canadianblackbook.com or any other website of your choice to choose two cars you wish to compare. You can use the same website to obtain a used car quote (your resell price). You may ignore sales taxes in this assignment;

you can use www.edmunds.com/tco.html or www.internetautoguide.com/17-1/cost-of-ownership.html to estimate maintenance cost for year one – year five, but you will need to type in a valid US zip-code. You may use 02222 for Boston. You can take average over five-year period to assume annual maintenance expense, and assume that costs in year six and beyond will be equal to costs in year five;

you may use the following link to obtain a gas price quote: www.cbc.ca/ns/news/interactives/gasprices;

www.fueleconomy.gov can be used as a source of data on combined city/highway fuel economy. Any other source will do as well;

http://calculator-converter.com converts mile per gallon (MPG) into L/100 km metric;

note: if you choose a rare vehicle – eg, Aston Martin – you might have trouble finding resale price;

finally, if you find using websites above complicated, use any other sources of data for this assignment. If you find it difficult to obtain some data, make assumptions. This is not a data searching exercise, so do not invest more than 15-20 minutes on data acquisition.

Estimate annual equivalent cost for each vehicle at a discount rate of five percent. Your deliverable should be no longer than one page. Make sure you show all your sources of information, work and formulas.

Please tell me which website you use and which you choose

Answer 1

Car Name	Status	Cost (in $)	Averagemaintenancecost	AverageFuelCost
Toyota Highlander	New	46530	942.17	1740.83
Toyota Highlander	Used	37988	887.00	1804.40

It is assumed that New Car is used for 6 years whereas the used car is used for 5 years.

Annual Equivalent Cost = (Asset Price*((Discount Rate)/(1-(1+Discount Rate)^-Period))) + (Maintenance cost + Fuel Cost) New Car Used Car Asset Price 46530 37988 Discount Rate 5% 5% Period 6 5 Maintenance Cost 942.17 887 Fuel Cost 1740.83 1804.4 (1+Discount Rate)^-Period 0.75 0.78 1-(1+Discount Rate)^-Period 0.25 0.22 Discount Rate/(1-(1+Discount Rate)^-Period) 0.20 0.23 Asset Price*((Discount Rate)/(1-(1+Discount Rate)^-Period)) 9167.22 8774.27 Annual Equivalent Cost = 11850.22 11465.67

Sources:

Cost: (www.canadianblackbook.com)

Maintenance Cost and Fuel Cost: (www.edmunds.com)