According to class, what is typically the LARGEST cost to owning a new car?

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When evaluating the typical costs associated with owning a new car, several possible expense categories come to mind, each with its own impact on the total cost of ownership.
Option: Gas. Fuel costs are real and ongoing, but for most new-car owners, gas is not the largest single expense over the life of the vehicle, especially given the high upfront price of the car itself.
Option: Repairing and maintenance costs. Regular maintenance and potential repairs accrue with time, but new cars generally come with warranties and fewer immediate repair needs, making this usually less than depreciation as a single, cumulative cost.
Option: Depreciation. This represents the drop in the car’s resale value from the time of purchase to later years. New cars typically experience the steepest depreciation in the first few years, which often makes depreciation the largest cost of ownership in the long run.
Option: Insurance. Insurance premiums are substantial and recur monthly or annually, yet insurance costs are spread over the ownership period and, while significant, generally do not surpass the big hit of depreciation at purchase or soon after.
Option: Licensing, registration and taxes. These are recurring but typically smaller annual fees and do not accumulate to exceed the depreciation hit in most cases.
In summary, while all these costs matter, the dominant one for a newly purchased car, especially in the first several years, is the depreciation—the reduction in the vehicle’s value from purchase to resale. This makes depreciation the largest single cost associated with owning a new car overall.

MGT 012Y 001 SQ 2025 Midterm Exam

According to class, what is typically the LARGEST cost to owning a new car?

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