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 $38,000. The dealer has a special leasing arrangement where you pay $105 today and $505 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 a 6 percent APR. You believe you will be able to sell the car for $26,000 in three years.
What break-even resale price in three years would make you indifferent between buying and leasing?
What is the present value of purchasing the car?