Refundable security deposit

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Reference no: EM131003277

A local car dealer is advertising a 24-month lease of a sport utility vehicle for $520 payable at the beginning of each month. The lease requires a $2,500 down payment plus a $500 refundable security deposit that is refunded at the end of the 24 month lease. As an alternative, the company offers to finance the purchase with 24 end-of-the-month payments of $908.57 along with requiring a $2,500 down payment. You plan to sell the vehicle at the end of the 24 month period for $10,000. Assuming you have access to a deposit account that pays an interest rate of 6% APR compounded monthly, which option is more favorable?

Reference no: EM131003277

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