The moment you drive a new car off the dealer's lot, the car is worth less than what you paid for it. This phenomenon is called depreciation, which means you will sell the car for less than the price that you paid for it. Some cars depreciate
more than others (that is, they depreciate at different rates), but most cars depreciate over time. On the other hand,
some older cars actually increase in value. This is called appreciation.
Let's suppose that in 2012, Jeralyn had a choice between buying a:
- a 2010 Fonda Concord EX for $27,000, which depreciates at 6% per year
I
-a 2010 Padillac Escalate for $39,000, which depreciates at 22.5% per year
- or a 1967 Fyord Rustang for $15,000 appreciating at 10% per year
7-103. Investigate the changing values of each of the cars by addressing the questions below.
a. What is the multiplier for the Concord?
For the Escalate?
For the Rustang?