Question
After deciding you want a new car, you can either lease the car or purchase it with a two-year loan. The car you want costs
After deciding you want a new car, you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a special leasing arrangement where you pay $97 today and $497 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 6 percent. You believe that you will be able to sell the car for $22,000 in two years.
What is the present value of purchasing the car? ---I tried 34000 as the answer and my instructor says that is incorrect. What break-even resale price in two years would make you indifferent between buying and leasing? |
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