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 $35,000.
The dealer has a special leasing arrangement where you pay $99 today and $499 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 12% APR. You believe you will be able to sell the car for $23,000 in three years. What is the PV of leasing cost? What is the PV of the purchasing cost? Should you lease or purchase?