You plan to buy a 2017 Honda Accord this year. The MSRP (manufacturer's suggested retail price) is $22,455. According to Edmunds.com, it costs an estimated $4,834 per year to operate (including fuel, taxes, insurance, and maintenance) and is expected to depreciate to $10,527 after 5 years.
When you go to Ken Garff Honda on 9th South and State Street, the salesman tries to convince you to buy the hybrid model, which has an MSRP of $29,605 (32% more expensive). According to Edmunds.com, it only costs an estimated $2,354 per year to operate (mostly due to lower fuel consumption) and is expected to depreciate to $14,912 after 5 years.
If you plan to sell the Accord after five years, how much more/less would it cost you to own the Hybrid? You plan to pay cash for the car. Assume an opportunity cost of capital of 3%.
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