Market for lemons
It is not necessary to discuss each question individually, but I am very curious on your thoughts regarding the article and the Excel exercise. Please share your comments with the class and summarize your discussion by stating whether this lesson changed your perspective on buying a car.
Questions for reflection on Market for Lemons
1. Information asymmetries can destroy markets if the difference in knowledge between the buyer and seller is to great. This article was written 40 years ago. What changes in the used and new car markets have helped reduce information asymmetries?
2. Do information asymmetries exist today in the used or certified car market?
3. Has this article changed the way you think about buying a car?
4. What are the advantages and disadvantages of buying a new car?
5. What are the advantages and disadvantages of buying a used car?
Questions for reflection on buying new vs. used
1. Did this Excel NPV example change your perspective on buying a new vs. used car?
2. The Honda Accord is one of the most reliable cars on the market. How would the difference in cost compare with different models and makes?
3. Why do we use a discount rate of 4% or whatever rate you may have on a home equity loan?
Suppose you need a reliable car for getting you to and from work. You do not care about the color or any other aspect of the car. You just want to spend the least amount possible on a car that is reliable. You have narrowed down your search and are trying to choose between a 2021 Honda Accord Sedan LX (new car) and a 2016 Honda Accord Sedan LX (used car).
You expect that the used car will require more maintenance expenses than the new car. You are confident that the information provided is accurate on the Edmunds.com website: https://www.edmunds.com/tco.html .
Use the following Excel Template to analyze a more accurate cost to own each car.