1. Car Purchase vs Lease Decision (25 points)

Compare the purchase versus the option to lease the car. Assume that you received the following offer:

Option 1: Purchase a car with a $2,000 down payment. If you invested those funds instead, you could earn 3% per year. You would borrow the remaining money over a 48-month period, and your monthly payment would be $450 per month. You believe you could sell the car for $10,000 at the end of 4 years.

Option 2: Lease the car with a $1,000 security deposit. If you invested those funds instead, you could earn 3% per year. Your monthly lease payment would be $300 per month over 48 months. You believe could get a full refund of your security deposit at the end of the leasing period.

1. What is the cost of purchasing a car? (10 points)
2. What is the cost of leasing a car? (10 points)
3. Based on your analysis, would you purchase or lease the car? (5 points)