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After deciding to buy a new car, you can either lease the car or purchase it on a four-year loan. The car you wish to buy costs $45,000. The dealer has a special leasing arrangement where you pay $600 per month starting today for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at a 4.8% APR. You believe you will be able to sell the car for $22,000 in four years.

(a) Should you buy or lease the car?

(b) What break-even resale price in four years would make you indifferent between buying and leasing?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91725766

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