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What is the cost today of purchasing the car

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Question - After deciding to get a new car, you can either lease the car or purchase it with a two-year loan. The car you wish to buy costs $30,500. The dealer has a special leasing arrangement where you pay $90 today and $490 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 7 percent, compounded monthly. You believe that you will be able to sell the car for $18,500 in two years.

-What is the cost today of purchasing the car?

-What is the cost today of leasing the car?

-What break-even resale price in two years would make you indifferent between buying and leasing?

Reference no: EM132906796

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