Different between buying and leasing

Assignment Help Financial Management

Reference no: EM131972677

After deciding to buy a new car, you can either lease the car or purchase it on a 5-year loan. The dealer has a special leasing arrangement where you pay $1,000 at the beginning of each month (starting from today) for the next 5 years. If you purchase the car, you will pay $3,000 today and pay it off in monthly payments (starting one month from today) of $1,200 over the next 5 years at a 6.0% APR. You believe you will be able to sell the car for $25,000 in 5 years. (a) Should you buy or lease the car? (b) What break-even resale price in 5 years would make you indifferent between buying and leasing?

Reference no: EM131972677

Questions Cloud

Used as benchmark in measuring systematic risk : Explain why returns on the stock market are used as a benchmark in measuring systematic risk.

Required irr for deposits to provide for the withdrawals : Calculate the required IRR for the deposits to provide for the withdrawals.

How many shares should firm issue for outstanding? share : Templeton Care? Facilities, Inc. was contemplating a stock dividend. how many new shares should the firm issue for each outstanding? share?

When the aircraft crashed due to design defect : Enstrom purchased an aircraft from the Interceptor Corporation. When the aircraft crashed due to a design defect,

Different between buying and leasing : What break-even resale price in 5 years would make you indifferent between buying and leasing?

How will this affect his payment amount : How will this affect his payment amount if he wants to still pay off the loan in 5 equal payments?

Conduct masonry and general contracting business : C.E. Stumpf & Sons, Inc., was formed to conduct a masonry and general contracting business.

Firm depreciated investment using five-year MACRS schedule : By how much would NPV increase if the firm depreciated its investment using the 5-year MACRS schedule?

The indicate the firm tax liability : Show how it calculates this credit, and the indicate the firm's tax liability for each of the next 5 years.

User Account

All Pages