How much cheaper is it than the alternative

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Rondo is in the market for a new car. He has narrowed his search down to 2 models. Model A costs $39,000 and Model B costs $34,000. With both cars he plans to pay cash and own them for 4 years before trading in for a new car. His research indicates that the trade in value for Model A after 4 years is 59% of the initial purchase price, while the trade in value for Model B is 41%. The interest rate is 4%. For simplicity assume that operating and maintenance costs for the models are identical. Which model is the better decision and how much "cheaper" is it than the alternative?

Reference no: EM132011677

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