Steve has the choice to buy a car for 20,000 with a 8.5% interest rate on the
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Question:
Steve has the choice to buy a car for 20,000 with a 8.5% interest rate on the loan he would need to get the car. He has no down payment to put on the car. He could get the loan for a 3 year term. In the alternative, he could do a 3 year lease on the vehicle. It would cost $300 per month for the 3 year lease term. The sales tax is 6%. The car is expected to have a value of $14,000 at the end of the lease period. Steve figures that he could get a 7% rate of return after tax on marketable investments for the same period of time.
Should Steve buy or lease? Why? Show calculations.
Expert Answer:
If he buys the car Car Price 20000 Sales Tax on the car 20000 x 6 1200 Loan amount 20000 ... View the full answer
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