Final answer:
A used car is cheaper than a similar new model due to depreciation, the reputation of the seller, and the lack of a new car warranty. Marvin must consider these factors as well as his risk tolerance when choosing between two similarly priced used cars.
Step-by-step explanation:
The reason why a two- or three-year-old used car can be bought for much lower than a similar new model primarily comes down to depreciation. A new car loses its value rapidly in the first few years after its purchase, which is a benefit to used car buyers. Additionally, the price may reflect the reputation of the dealership, the cost of potential future repairs, and the lack of a warranty that typically covers new vehicles.
Marvin, when considering two similar used cars, one priced at $4,000 and another at $4,600, should investigate the reasons behind the price difference. The more expensive option may indicate dealer reliability and potentially lower risk of costly repairs, while the cheaper car might imply higher risk. Therefore, the choice depends on Marvin's willingness to assume risk versus his desire to minimize potential repair costs.