You must decide whether to buy a new car for $22,000 or lease the same car over a three-year period. Under the terms of the lease, you can make a down payment of $3000 and have monthly payments of $200. At the end of the three years, the leased car has a residual value (the amount you pay if you choose to buy the car at the end of the lease period) of $13,000. Assume you can sell the new car at the end of the three years at the same residual value. Is it less expensive to buy or to lease?

You must decide whether to buy a new car for $22,000 or lease the same car over a three-year period. Under the terms of the lease, you can make a down payment of $3000 and have monthly payments of $200. At the end of the three years, the leased car has a residual value (the amount you pay if you choose to buy the car at the end of the lease period) of $13,000. Assume you can sell the new car at the end of the three years at the same residual value. Is it less expensive to buy or to lease?

Algebra and Trigonometry (MindTap Course List)

4th Edition

ISBN:9781305071742

Author:James Stewart, Lothar Redlin, Saleem Watson

Publisher:James Stewart, Lothar Redlin, Saleem Watson

Chapter13: Sequences And Series

Section13.CR: Chapter Review

Problem 66E

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Question

You must decide whether to buy a new car for

$22,000

or lease the same car over a three-year period. Under the terms of the lease, you can make a down payment of

$3000

and have monthly payments of

$200.

At the end of the three years, the leased car has a residual value (the amount you pay if you choose to buy the car at the end of the lease period) of

$13,000.

Assume you can sell the new car at the end of the three years at the same residual value. Is it less expensive to buy or to lease?

Expert Solution