Here’s a way to infuse some math into your personal finance lessons. Also helps students understand how important maintenance costs should be weighed before purchasing a used car.

For all those students looking to buy a used car, check out this great data set on Priceonomics. Chock full of charts, here are the two that help to answer this question best:

• Here’s the short-run data (first 75,000 miles of operation):

• Here’s the long-run data (first 150,000 miles):

Questions for your students:

• How strong is the relationship between short-term and long-term maintenance costs? In other words, how many of the least/most expensive car models for the first 75,000 miles also appear on the top 10 for 150,000 miles?

• Assuming that you just bought a used Ford Mustang with 75,000 miles on it and you expect to drive 15,000 miles a year. How much should you assume you will pay in maintenance costs  per year?
  • Mustang maint. costs for 150,000 miles = $27,100
  • Mustang maint. costs for first 75,000 miles = $11,800
  • Mustang maint. costs for 75,000 to 150,000 miles = $27,100-$11,800 = $15,300
  • $15,300/75,000 miles = $0.20 per mile
  • $0.20 per mile X 15,000 miles = $3,000 per year!

• Assume that the typical driver drives 10,000 miles per year, how much more would a Mustang owner pay in annual maintenance costs as compared to a Toyota Prius owner?
  • Ford Mustang cost for first 150k miles – Toyota Prius cost for first 150k  miles = $21,400
  • Divide $21,400/150,000 miles driven = $0.14 per mile driven is the additional cost of the Mustang
  • Multiply $0.14 per mile * 10,000 miles driven per year = $1,400 more per year in maintenance costs

• Do cars typically cost more to maintain the more miles that you drive them? Prove your answer by comparing the costs for the first 75,000 miles to the costs for the next 75,000 miles for several of the models that appear on both lists.
  • For example, the Toyota Prius costs $2,800 for the first 75,000 miles and $6,700 for the first 150,000 miles. From these figures, we can calculate that the Prius costs $3,900 to maintain for the second 75,000 miles ($6,700 – $2,800).

• How does analyzing this information inform your decision on purchasing a used car?

___________

Students love this NGPF Activity on Buying A Used Car

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.