Suppose you want to buy a new car and are trying to choose between two models:
Model A: costs $16,500 and its gas mileage is 25 miles per gallon and its insurance is $250 per year.
Model B: costs $24,500 and its gas mileage is 40 miles per gallon and its insurance is $450 per year.
If you drive approximately 40,000 miles per year and the gas costs $3 per gallon:
Find a formula for the total cost of owning Model A where the number of years you own the car is represented by x.
Find a formula for the total cost of owning Model B where the number of years is the independent variable.
Find the total cost for each model for the first five years.
If you plan to keep the car for 4 years, which model is more economical? What about if you plan to keep it for 6 years?Find the number of years
in which the total cost to keep the two cars will be the same.
Identify the number of months where neither car holds a cost of ownership advantage.
What effect would the cost of gas doubling have on cost of ownership? Graph or show hand calculations.
If you can sell either car for 40% of its value at any time, how does the analysis change? Graph or show hand calculations.
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