Honda : 16,000
each year depreciates 8% from 100% so will be left with 100-8 =92% or 0.92
in 5 years : 16,000* 0.92^5 ≈ $10,545.30
in 10 years : 16,000* 0.92^10 ≈ $6,950.22
Kia : $12,000
each year depreciates 12 % from 100% so will be left with 100-12 =88% or 0.88
in 5 years : 12,000* 0.88^5 ≈ $6,332.78
in 10 years : 12,000* 0.88^10 ≈ $3,342.01
Jess should buy the Honda if wants to use it for 5 years or less because although is more expensive than Kia, it depreciates less in 5 years.
In 5 years the difference in depreciation is 10,545.30 -6,332.78= $ 4,212.52 this is greater that the difference in the actual price 16,000-12,000 =$ 4,000
Jess should buy the Kia if wants to use the car for 10 years or more because Kia will depreciates less than Honda in 10 years.
In 10 years the difference in depreciation is 6,950.22 -3,342.01 =$ 3, 608.21 this is lower that the difference in the actual price 16,000-12,000 =$ 4,000
