Say your parents give you a car for your birthday. It is not the new model you wanted, but it's in very good condition. They bought it used for $15,000 (market value). The cost of keeping the car to you is (not counting maintenance and operation cost) is:
$15,000
To calculate the cost of keeping the car, we need to consider the depreciation value of the vehicle. Depreciation refers to the decrease in value of an asset over time. In this case, the car depreciates due to its usage, age, and market factors.
To estimate the annual depreciation cost, we need to know the useful life of the car. Let's assume that the car has a useful life of 10 years.
First, we calculate the annual depreciation by dividing the initial cost by the useful life:
Depreciation = Initial Cost / Useful Life
Depreciation = $15,000 / 10 years = $1,500 per year
So, the annual depreciation cost of the car is $1,500.
Please note that this calculation only considers the depreciation cost and excludes other expenses like maintenance, repairs, insurance, and fuel.