After deciding to buy a new car, you can either lease the car or purch

QUESTION

After deciding to buy a new car, you can either lease the car or purchase it with a three-year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $1 today and $450 per month for the next three years. If you purchase the car, you will pay it off in
Answer: Lease Find the PV of both options and compare: PV lease (Note: use the interest rate on the loan to compute the PV of the lease) Enter: N = 36; I/Y = 0.6667; PMT = $450; FV = 0;CPT; PV Solution: $14,360.31 $1 = $14,361.31 PV loan (Price

of the Car PV of the Resale Price) Enter: N = 36; I/Y = 0.6667; PV = 0; PMT = 0; FV = $23,000;CPT; PV Solution: $35,000 $18,106.86 = $16,893.14 Answer: Lease

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