Should you lease or buy the car, Financial Accounting

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Should you lease or buy the car

Problem

There are two options to purchase a car: 5-year loan vs. lease the car.

The price of the car is $50,000. If you purchase the car, you are going to pay it off in monthly payments over the next 5 years at an annual percentage rate of 6.99 per cent. You expect to sell the car for $28000 in five years. If you lease the car, you have to pay 20% of the price of the car today and $550 per month for the next five years. Should you lease or buy the car? What break-even resale price in five years would make you indifferent between two options?

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