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 $55,000. The dealer has a special leasing arrangement where you pay $800 per month (at the beginning of each month) at a 3.6% APR for the next three years. You believe you will be able to sell the car for $35,000 in three years.

1. (8 points) Should you buy or lease the car? Provide all the equations.

2. (8 points) What break-even resale price (residual value) in three years would make you indifferent between buying and leasing?