Mary is interested in driving a new Tesla Model 3 for four years. Tesla quoted Mary two options—financing or leasing. The leasing deal requires a down payment of $2,999 and a monthly payment of $329 for 48 months. Alternative she can purchase Tesla at $38,000 using dealer's promotional financing
deal at 2.4% interest rate (APR on a monthly base) for 48 months. At the end of the 48th month, the car is worth 60% of the purchasing price. (that is, if she leases the car, she can buy the car from the dealer at that price). Since it is an EV, she can enjoy $3000 tax break only if she purchases the car. Mary has heard that you are taking Fin6301 and would like to get your help. Assume that the regular interest rate is 3.3% (APR on a monthly base, borrowing from any bank).
(a) If Mary uses the financing deal to purchase her car, how much does she pay each month?
(b) Which option is the best if Mary will purchase the car at the end of 48 month lease?

Answer rating: 100% (QA)

a To calculate the monthly payment for Mary if she chooses the financing deal we can use the formula ... View the full answer