After deciding to buy a new car, you can either lease the car or purchase...
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After deciding to buy a new car, you can either lease the car or purchase it on a 4-year loan. The dealer has a special leasing arrangement where you pay $1,200 at the beginning of each month (starting from today) for the next 4 years. If you purchase the car, you will pay $5,000 today and pay it off in monthly payments (starting one month from today) of $1,400 over the next 4 years at a 3.6% APR. You believe you will be able to sell the car for $24,000 in 4 years.
(a) (6 points) Should you buy or lease the car?
(b) (4 points) What break-even resale price in 4 years would make you indifferent between buying and leasing?
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