Consider the following situation, which involves two options. Determine which option is less expensive. Are there unstated factors that might affect your decision?
You currently drive 375 miles per week in a car that gets 23 miles per gallon of gas. You are considering buying a new fuel-efficient car for $12 comma 000 (after trade-in on your current car) that gets 41 miles per gallon. Insurance premiums for the new and old car are $1000 and $600 per year, respectively. You anticipate spending $1300 per year on repairs for the old car and having no repairs on the new car. Assume gas costs $3.00 per gallon. Over a five-year period, is it less expensive to keep your old car or buy the new car?