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Suppose that you have the option to lease a new Mitsubishi Eclipse, which you otherwise intend...

Suppose that you have the option to lease a new Mitsubishi Eclipse, which you otherwise intend to buy. You must put $2000 down, and will make payments of $311 per month for 48 months, at the beginning of each month. Upon termination, you can purchase the car for an additional payment of $7000 at lease expiration. Alternatively, the dealer has offered to finance the purchase at 5.4% APR for 48 months, with nothing down, yielding payments of $485 per month at the end of each month. If you choose to purchase the car using dealer financing, rather than choosing the lease-purchase option, how much have you saved (+) or lost (-) on the effective purchase price of the car in dollars and cents. (make your answer positive when you save, negative when you are paying more.

Solutions

Expert Solution

If you choose to purchase the car using dealer financing, rather than choosing the lease-purchase option, how much have you saved (+) or lost (-) on the effective purchase price of the car

=PV(5.4%/12,48,-311,-7000,1)+2000-PV(5.4%/12,48,-485)
=206.707

jeff jeffy answered 2 years ago
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