Manny is an online student who currently owns an older car that is fully paid for. He drives, on average, 150 miles per week to commute to work. With gas prices currently at $2.63 per gallon, he is considering buying a used, fuel-efficient car, and wants to know if it would be a good financial decision.
The old car Manny owns currently gets 20 miles per gallon for average fuel efficiency. It has been a great vehicle, but with its age, it needs repairs and maintenance that average $650 per year (as long as nothing serious goes wrong).
He is considering buying a newer used car that will cost a total of $7,500 over a three-year loan process. The used car gets 26 miles per gallon and would only require an average of $30 per month for general maintenance. To help make a decision Manny wants to calculate the total costs for each scenario over three years.
i) Find the total costs (gas, maintenance/repairs, purchase price) for each scenario over the three years.
1) Keep the old car
2) Buy the fuel-efficient used car
ii) Manny also realizes that the accuracy of his assumptions might play a role in his ability to follow-through with his decision. Which three of the following assumptions have the greatest potential to limit his ability to follow-through, if they turn out to be false assumptions?
A. Manny assumes that nothing will go seriously wrong with either car during this three-year period.
B. Manny assumes the loan period will be 3 years.
C. Manny assumes he will continue to drive about the same number of miles each week over this three-year period.
D. Manny assumes there are 52 weeks in a year.
E. Manny assumes gas costs will remain about the same over the three years.