You currently drive 300 miles per week in a car that gets 15

Last updated: 7/18/2022

You currently drive 300 miles per week in a car that gets 15 miles per gallon of gas. You are considering buying a new fuel-efficient car for $12,000 (after the trade-in allowance on your current car), which gets 50 miles per gallon. Insurance premiums for the new and old cars are $800 and $600 per year, respectively. You anticipate spending $1200 per year on repairs to the old car and having no repairs on the new car. Assume that gas costs $3.50 per gallon. Over a 5-year period, is it less expensive to keep your old car or buy the new car?