Engineering

Economy
Economic Analysis of a Brand New Car and a
Second Hand Car

Submitted by: Christopher Joshua S. Martinez

BSCE III-3

Submitted to: Engr. Bernard Cauyan Capellan

 Data gathered

Brand New 2016 Ford Explorer

2nd Hand 2008 Ford Explorer
Eco boost

Initial Cost PHP2,870,000.00 PHP858,000.00

Downpayment 20% (PHP574,000.00) 40%(PHP343,200.00)

Amount Finance PHP2,296,000.00 PHP514,800.00

Amount Finance for 5 years PHP50,416.00 PHP9,438.00

Insurance PHP75,000.00 PHP15,026.35

LTO(registration) Free PHP2,800.00

TPL PHP1,800 ------

Chattel Mortgage PHP50,000.00 PHP20,000.00

16 MPG/ (city driving); 22 MPG 13 MPG (city driving); 19 MPG

Fuel Consumption
(highway driving) (highway driving)
Computations:
Amount Finance: for 5 years:
2,870,000.00(2,870,000.00 x .2) = (2,296,000.00/60) x 1.3175(interest) = PHP50, 416.00

858,000.00( 858,000.00 x .4 ) = (514,800.00/60) x 1.1(interest) = PHP9, 438.00

Gas cost annually:

6.8 km 1 mile 3.7854 Liters
x x x 2 ( back forth ) x 38.345 ( gas price ) x 365 days=PHP 27, 983.10
16 MPG 1.6093 km 1 ga l

Distance Travelled from Home to PUP Mabini Campus:

6.8km x 365 days x 2(back and forth) = 4964 km/year

Yearly Amortization:

PHP50, 416.00 x 12 months = PHP604, 992.00

PHP9, 438.00 x 12 months =PHP113, 256.00

Brand New Ford 2016 Explorer Eco boost Salvage

Value
 Cash Flow Diagram

Present Day 1st year 2nd year 3rd year 4th year 5th year

Annuity Annuity Annuity Annuity Annuity

Insurance + Insurance + Insurance + Insurance + Insurance +

Third Party Third Party Third Party Third Party Third Party
Liability Liability Liability Liability Liability

Maintenance Maintenance Maintenance Maintenance Maintenance

Cost Cost Cost Cost Cost

Fuel Cost Fuel Cost Fuel Cost Fuel Cost Fuel Cost

Downpayment (P574,
000.00)

Chattel Fee (P50,

Computations: Tires PHP15, 600.00 (245/60R18 same as
PHP255/50R20)
For every year, the following costs constitute the
payment: Change Oil PHP5, 390.00

*Annuity = PHP604, 992.00 *Insurance = PHP76, 800.00

*Maintenance Cost = PHP35, 695.00 *Chattel Fee = PHP50, 000.00

Battery PHP14, 705.00 *Fuel Cost = PHP27, 983.10

Total Cost = PHP795, 470.10

4
(1.02) 1
5
F5 = (DP + Chattel Fee) (1.02) + Total Cost [ 0.02 ]

4
(1.02) 1
5
= (574,000.00 + 50,000) (1.02) + 795, 470.10 [ 0.02 ]
 = 688,946.42 + 3,278,615.93 = PHP 3, 967,562.352 nd Hand 2008 Ford Explorer
Salvage
Cash Flow Diagram Value

Present Day 1st year 2nd year 3rd year 4th year 5th year

Annuity Annuity Annuity Annuity Annuity

Insurance + Insurance + Insurance + Insurance + Insurance +

Third Party Third Party Third Party Third Party Third Party
Liability Liability Liability Liability Liability

Maintenance Maintenance Maintenance Maintenance Maintenance

Cost Cost Cost Cost Cost

Fuel Cost Fuel Cost Fuel Cost Fuel Cost Fuel Cost

Downpayment (P343,
200.00)

Chattel Fee (P20,

Computations: Tires PHP14, 400.00 (235-65-18)

For every year, the following costs constitute the Change Oil & Tune-Up PHP9, 870.00
payment:
Labor PHP900.00
*Annuity = PHP113, 256.00
*Insurance = PHP15, 026.35
*Maintenance Cost = PHP34, 320.00
*Chattel Fee = PHP20, 000.00
Battery PHP9, 150.00
*Fuel Cost = PHP27, 983.10

Total Cost = PHP210, 585.45

(1.02) 41
F5 = (DP + Chattel Fee) (1.02)5 + Total Cost [ 0.02 ]

4
(1.02) 1
5
= (343,200.00 + 20,000) (1.02) + 210, 585.45 [ 0.02 ]

= 401,002.15 + 867950.58 = PHP 1, 268,952.83

Brand New Car

Declining Balance Method: R = 0.15

Computations:

dk

d1 = BV x R

= 2,870,000.00 x 0.15

=P430,500.00

d2= BV(1-R) n-1(R)

= 2,870,000.00 (1-0.15) 2-1(0.15)

=P365,925.00

d3 = BV(1-R) n-1(R)

= 2,870,000.00(1-0.15) 3-1(0.15)

=P311,036.25

d4 = BV(1-R) n-1(R)

= 2,870,000.00(1-0.15) 4-1(0.15)

= P265,380.82
d5 = BV(1-0.15) n-1(0.15)

= 2,870,000.00(1-0.15) 5-1(0.15)

=P 224,723.69

dk*

d1* = BV[1-(1-R)n]

= 2,870,000.00 [1-(1-0.15)1]

= P430,500.00

d2* = BV[1-(1-0.15)n]

= 2,870,000.00 [1-(1-0.15)2]

= P796,425.00

d3* = BV[1-(1-0.15)n]

= 2,870,000.00 [1-(1-0.15)3]

= P1,107,461.25

d4* = BV[1-(1-0.15)n]
= 2,870,000.00 [1-(1-0.15)4]

= P1,371,842.06

d5* = BV[1-(1-0.15)n]

= 2,870,000.00 [1-(1-0.15)5]

= P1,596,565.75

k dk dk* BVk
0 0 0 P2,870,000.00
d1 P430,500.00 P430,500.00 P2,439,500.00
d2 P365,925.00 P796,425.00 P2,073,575.00
d3 P311,036.25 P1,107,461.25 P1,762,538.75
d4 P265,380.82 P1,371,842.06 P1,498,157.94
d5 P 224,723.69 P1,596,565.75 P1,273,434.25
Salvage Value = P1,273,434.25

Total Expense = Future worth in 5 years Salvage value after 5 years

= PHP 3, 967,562.35 - P1,273,434.25

=P2,694,128.10
2nd Hand Car

Declining Balance Method: R = 0.15

Computations:

dk

d1 = BV x R

= 858,000.00 x 0.15

=P128,700.00

d2= BV(1-R) n-1(R)

= 858,000.00 (1-0.15) 2-1(0.15)

=P109,395.00

d3 = BV(1-R) n-1(R)

= 858,000.00(1-0.15) 3-1(0.15)

=P92,985.75

d4 = BV(1-R) n-1(R)
= 858,000.00(1-0.15) 4-1(0.15)

=P79,037.89

d5 = BV(1-0.15) n-1(0.15)
= 858,000.00(1-0.15) 5-1(0.15)

=P67,182.20

dk*

d1* = BV[1-(1-R)n]

= 858,000.00 [1-(1-0.15)1]

= P128,700.00

d2* = BV[1-(1-0.15)n]

= 858,000.00 [1-(1-0.15)2]

= P238,095.00

d3* = BV[1-(1-0.15)n]

= 858,000.00 [1-(1-0.15)3]

= P331,080.75

d4* = BV[1-(1-0.15)n]

= 858,000.00 [1-(1-0.15)4]

= P410,118.64
d5* = BV[1-(1-0.15)n]

= 858,000.00 [1-(1-0.15)5]

= P477,300.85

k dk dk* BVk
0 0 0 P858,000.00
d1 P128,700.00 P128,700.00 P729,300.00
d2 P109,395.00 P238,095.00 P619,905.00
d3 P92,985.75 P331,080.75 P526,919.25
d4 P79,037.89 P410,118.64 P447,881.36
d5 P67,182.20 P477,300.85 P380,699.15
Salvage Value = P380,699.15

Total Expense = Future worth in 5 years Salvage value after 5 years

= PHP 1, 268,952.83 - P380,699.15

=Php 888,253.68

Conclusion:

Buying a 2nd hand Ford Explorer car, specifically 2008 Ford Explorer, is more practical and cost efficient
compared to the 2016 Explorer Eco Boost. Up to 1.6M will be saved if the older and used car will be
purchased.
I chose the charter ping insurance for the
reason they have the lowest offer among the
companies.
Other Picture

I went to 4 used cars shops namely, Speedlane, Axis Autonetwork, North Edsa Cars and
Red Central. Speedlane has 2006 Ford Explorer model and Red Central has 2008 model
and they gave me details so I chose that shop and the explorer there.
The writings in the yellow paper are mine because I only talked through the telephone to
the parts department of Ford.
The selfies were photographed on separate days because I thought it wouldnt be
necessary to see my face. So I went back there on other day then took a selfie.

The contact of the agent I talked to is in the expedition leaflet because expedition was my
primary car but since theres a very low chance to see an expedition in used cars shops for
its resale value is obviuosly lower than you can expect.