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Adam can purchase a new car for $30,000. Alternatively, in addition to a down payment...

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Finance

Adam can purchase a new car for $30,000. Alternatively, in addition to a down payment of $2,200, Adam can make lease payments of $525 at the beginning of each month for three years to lease the car. The car has a residual value of $15,000. Assume that the cost of borrowing is 3.95% compounded monthly.

a. Which option is economically better for Adam?

Buy Now

or

Lease

b. In the lease option, what will be the buyback value of the vehicle at the end of two years?

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