After deciding to get a new car, you can either lease the car or purchase it with

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After deciding to get a new car, you can either lease the car or purchase it with a three-year loan. The car you wish to buy costs $39,000. The dealer has a special leasing arrangement where you pay $3,000 today and $450 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 4.1 percent, compounded monthly. You believe that you will be able to sell the car for $24,500 in three years. Should you buy or lease the car? What break-even resale price in three years would make you indifferent between buying and leasing?

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Corporate Finance Core Principles And Applications

ISBN: 9781260571127

6th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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