Megan can purchase a new car for $30,000. Alternatively, in addition to a down payment of $2,000, Megan can make lease payments of $475 at the beginning of each month for three years to lease the car. The car has a residual value of $15,000. Assume that the cost of borrowing is 3.85% compounded monthly.

Which option is economically better for Megan?

In the lease option, what will be the buyback value of the vehicle at the end of two years?