Question
After deciding to get a new car, you can either lease the car or purchase it with a two-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 two-year loan. The car you wish to buy costs $30,000. The dealer has a special leasing arrangement where you pay $89 today and $489 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 5 percent, compounded monthly. You believe that you will be able to sell the car for $18,000 in two years.
What is the cost today of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Cost of purchasing $
What is the cost today of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Cost of leasing $
What break-even resale price in two 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.)
Break-even resale price $
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