Question

After deciding to buy a new car, you can either lease the car or purchase it on a two-year loan. The car you wish to buy costs $32,000. The dealer has a special leasing arrangement where you pay $93 today and $493 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. You believe you will be able to sell the car for $20,000 in two years. |

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

Answer #1

After deciding to buy a new car, you can either lease the car or
purchase it on a three-year loan. The car you wish to buy costs
$32,500. The dealer has a special leasing arrangement where you pay
$94 today and $494 per month for the next three years. If you
purchase the car, you will pay it off in monthly payments over the
next three years at an APR of 6 percent. You believe you will be
able to...

After deciding to acquire a new car, you can either lease the
car or purchase it with a two-year loan. The car you want costs
$32,000. The dealer has a leasing arrangement where you pay $93
today and $493 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. You believe that you will be able to
sell the...

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
$34,500. The dealer has a special leasing arrangement where you pay
$98 today and $498 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 5 percent, compounded monthly. You
believe that you will...

After deciding to get a new car, you can either lease the car or
purchase it with a four-year loan. The car you wish to buy costs
$35,500. The dealer has a special leasing arrangement where you pay
$100 today and $500 per month for the next four years. If you
purchase the car, you will pay it off in monthly payments over the
next four years at an APR of 7 percent, compounded monthly. You
believe that you will...

After deciding to buy a new car, you can either lease the car or
purchase it with a three-year loan. The car costs $30,000. The
dealer has a lease program where you pay $100 today and $400 per
month for the next three years. If you purchase the car, you will
pay it off in monthly payments over the next three years at a 8
percent APR. You believe that you will be able to sell the car for
$20000...

After deciding to get a new car, you can either lease the car or
purchase it with a four-year loan. The car you wish to buy costs
$37,000. The dealer has a special leasing arrangement where you pay
$103 today and $503 per month for the next four years. If you
purchase the car, you will pay it off in monthly payments over the
next four years at an APR of 7 percent, compounded monthly. You
believe that you will...

Suppose you can buy a new car for $15,000 and sell it for $6,00
after six years. Or, you can lease the car to $300 per month for
three years and return it at the end of the three years. Assume
that lease payments are made yearly instead of monthly (i.e., are
$3,600 per year for each of the three years).
a.) If the interest rate, r, is 4 percent, should you lease or
buy?
b.) What if the interest...

You buy a car, which cost $320.000. The purchase can be
financed with a payment of 20% and the remaining 80% is covered by
an 8-year annuity loan. The loan bears interest rate of 3% p.a.,
and it has monthly terms in the following you therefore also apply
a discount rate of 3% p.a.
a) Determine the size of the payment, U, and the monthly
payment, Y, belonging to the loan.
You consider if it is realistic to sell the...

Suppose that you have the option to lease a new car, which you
otherwise intend to purchase for $21,000. The lease terms: $3000
down and payments of $304 per month for 48 months, at the beginning
of each month. Upon termination, you can purchase the car for an
addition payment of $7000 at lease expiration. If your financing
rate is 5.6% APR, and you discount the lease-purchase option using
that same rate, how much will pay to buy car (in...

You are thinking about leasing a car, and the dealer offers you
the following deal: You can drive the $23,000 car off the lot
today, with no upfront payment if you agree to make monthly
payments of $375.22 for five years. At the end of
the lease, you can keep the car if you pay out a residual value
price of $4,000. What is the annual rate of interest
embedded in this lease arrangement?

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