George and Martha have $6000 in a checking account that pays no interest. They want to buy their first car right now, and at the same time save monthly toward a house. The plan is to drive the car for 5 years, then sell it the same month they put the money down on the house. You have been asked to help them decide which car to buy and to determine, based on their plan, the highest price house they can afford to buy. Here are the facts and assumptions as they see them:

Part 1
Buying the car. They have narrowed their choice to two models, one from dealer A and one from dealer B.

Car ACar B
Price$26,000$21,000
Down payment8%15%
APR1.5%2.5%
Months to pay6048
Resale value30%40%
Miles/gallon3530

Cost of operating the car. In addition to their monthly car payments, G&M will need to buy gas, change the oil, and pay for insurance.
•They assume gas will average $2.60/gallon over the next 5 years. They drive 20,000 miles each year.
•Oil changes are $60 every 5000 miles.
•Insurance and licensing fees are based on the car price, and they figure that 5% of the full price each year will suffice to cover both.

Calculate:
1.Monthly and total (5-yrs) payments for both car options (make sure you calculate the monthly payments only on the amount you are borrowing!)
2.Monthly and 5 year operating cost for both car options, and
3.Total cost of ownership of each car option over the 5 years.
4.Choose the car you think George and Martha should purchase and explain why you chose the car you did. You will use the costs of the car you chose to