Steve has the choice to buy a car for 20,000 with a 8.5% interest rate on the loan he would need to get the car. He has no down payment to put on the car. He could get the loan for a 3 year term. In the alternative, he could do a 3 year lease on the vehicle. It would cost $300 per month for the 3 year lease term. The sales tax is 6%. The car is expected to have a value of $14,000 at the end of the lease period. Steve figures that he could get a 7% rate of return after tax on marketable investments for the same period of time.

Should Steve buy or lease? Why? Show calculations.