Calculating Annuity Values After deciding to buy a new car, you can either lease the car or purchase it with a three-year loan. The car you wish to buy costs $31,000.

The dealer has a special leasing arrangement where you pay $1,500 today and

$405 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 percent. You believe that you will be able to sell the car for $20,000 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?