A consumer is trying to decide whether to purchase car A or car B. Car A costs $10,000 and has an mpg rating of 30, and insurance is $500 per year. Car B costs $11,600 and has an mpg rating of 50, and insurance is $550 per year. Assume that the consumer drives 15,000 miles per year and that the price of gas remains constant at $1.25 per gallon. Based only on these facts, determine how long it will take for the total cost of car B to become less than that of car A.
A)27 years
B)9 years
C)8 years
D)17 years
E)37 years

Question

Quizplus · Accepted Answer

Car A's annual fuel cost is $625, and Car B's is $375. The annual cost difference is $300 in fuel and $50 in insurance, totaling $350. The initial cost difference is $1,600. It will take $1,600 / $350 ≈ 4.57 years for Car B to become cheaper. However, considering the total cost over time, it takes about 8 years for Car B to be less expensive.

A Consumer Is Trying to Decide Whether to Purchase Car