You are considering buying an automobile for $20,000, and you have a $2,000 down payment. The sales

Question:

You are considering buying an automobile for $20,000, and you have a $2,000 down payment. The sales tax rate is 7 percent, and the interest rate to borrow the remaining funds for ﬁve years is 6 percent. Other fees involved in the purchase are $200. The market rate for current investments is 4 percent. The automobile is expected to be worth $5,000 at the end of the ﬁve years, with an annual rate of fair market value reduction of 15 percent. You also have the option of leasing the same vehicle for three years at an 8 percent interest rate. The requires a security deposit of $500, and other front-end fees total $750. At the end of the lease term, the vehicle is expected to have a fair market value of $12,000.
Required:
Go to www.lendingtree.com/partners/autotrader/ AutoLeaseBuyCalc.asp and determine the net costs of buying and leasing. Are there any other items that you would want to consider in choosing the buy or lease alternative?
Dealer
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...