Question
After deciding to acquire a new car, you can either lease the car or purchase it with a three-year loan. The car you want costs
After deciding to acquire a new car, you can either lease the car or purchase it with a three-year loan. The car you want costs $37,000. The dealer has a leasing arrangement where you pay $2,400 today and $580 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 $22,000 in three years. a. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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