Question: You are trying to decide whether to keep your current car or buy a new car. If you keep your current car you will pay

You are trying to decide whether to keep your current car or buy a new car. If you keep your current car you will pay $350 per month (starting next month) on average for maintenance, gas, property tax and insurance. You will make these payments for 10 years. Alternatively, you can buy a new car and pay $28,000 today and $300 per month (starting next month) on average for maintenance, gas, property tax and insurance. You will make these payments for for 10 years. If your investments earn 3% APR (compounded monthly), which alternative is cheaper in present value terms and by how much?

keep existing car saves $23,963

keep existing car saves $22,157

keep existing car saves $22,822

get new car, saves $24,863

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