Question
After deciding to get a new car, you can either lease the car or purchase it with a four-year loan. The car you wish to
After deciding to get a new car, you can either lease the car or purchase it with a four-year loan. The car you wish to buy costs $37,000. The dealer has a special leasing arrangement where you pay $103 today and $503 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent, compounded monthly. You believe that you will be able to sell the car for $25,000 in four years. What break-even resale price in four years would make you indifferent between buying and leasing?
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