You just bought a new luxury sports car for $125,000. Before you had time to get insurance, the car was wrecked. Weird Wally offers to take it off your hands for $10,000. You can then purchase a similar model for $128,000. A body-shop (with an excellent reputation) offers to rebuild the wrecked car for $90,000 and loan you a similar model while the vehicle is being rebuilt. Once rebuilt, the body-shop claims, it will "run like a new car and nobody will be able to tell the difference." What is the preferred course of action, from a financial point of view?
A) Rebuild to save $13,000.
B) Rebuild to save $28,000.
C) Rebuild to save $38,000.
D) Sell to Weird Wally and save $7,000.

Question

Quizplus · Accepted Answer

Rebuilding the car costs $90,000, and Weird Wally offers $10,000 for the wrecked car, which could be added to the rebuild cost, totaling $100,000. Buying a new similar model would cost $128,000. Therefore, rebuilding saves $28,000 ($128,000 - $100,000).

You Just Bought a New Luxury Sports Car for $125,000