You are in the market for a new car and have decided to buy a new compact in the

Question

You are in the market for a new car and have decided to buy a new compact in the market. There are two models that you are considering. One is with a gasoline engine and the other is a hybrid version, both are comparably equipped. You plan to keep the car for five years. The model with gasoline engine will cost $25,000 and is expected to have annual maintenance expenditures of $500. The resale price at the end of five years is estimated to be $3,000. This model will give you an average of 25 miles per gallon. The hybrid model will cost $35,000 and is expected to have annual maintenance expenditures of $700. The resale price at the end of five years is estimated to be $6,000. This model will give you an average of 42 miles per gallon. If you drive 20,000 miles per year and the price of gasoline for this analysis is assumed to be $4.00 per gallon, which model should you purchase? Assume that the cost of money is 10% per year compounded yearly.

Explanation / Answer

Gasoline engine=$25000

Resale value=$3000

Annual expenditure=$500

Average=25 miles per galoon

Toatal for gasoline engine=$25500

Hybrid model=$35000

Expenditure=$700

Resale value= $6000

Average=42 miles

For 20000 miles gasoline will require = 20000/25=800 galoon*4=$3200

For hybrid=20000/42=476galoon*4=$1904

So there is more profit in hybrid car then gasoline..!!

So i will purchase hybrid car..!!

Plz.. do rate with 5 star ratings.!!!

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