You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on
Question:
You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options.
(i) Purchase the car for cash and receive a $1,900 cash rebate from Dealer A. The price of the car is $19,000.
(ii) Lease the car from Dealer B. Under this option, you pay the dealer $550 now and $225 a month for each of the next 36 months (the first $225 payment occurs 1 month from today). After 36 months you may buy the car for $10,900.
(iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero-interest 36-month loan with monthly payments. The car price is $19,000. Suppose the market interest rate is 4%. What is the net cost today of the cheapest option?