You have decided to acquire a new car that costs $30,000. You are considering whether to least it for three years or to purchase it and finance the purchase with a three-year installment loan. The lease requires no downpayment and lasts for three years. Lease payment are $400 monthly starting immediately, whereas the installment loan will require monthly payments starting a month from now at an annual percentage rate (APR) of 8%.

1. If you expect the resale value of the car to be $20,000 three years from now, should you buy or least it?
2. What is the breakeven resale price of the car three years from now, such that you would be indifferent between buying and leasing it.

Answer rating: 100% (QA)

Lets analyze the costs associated with both options and compare them to decide whether leasing or pu... View the full answer