2. 58.

Calculating annuity values [LO 6.1] After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $43 000. The dealer has a special leasing arrangement where you pay $4 300 today and $505 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 per cent. You believe you will be able to sell the car for $28 000 in three years.

Should you buy or lease the car? What break-even resale price in three years would make you indifferent between buying and leasing?