Use the automobile lease versus purchase analysis

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Reference no: EM131868927

Art Winkler is trying to decide whether to lease or purchase a new car costing $31,000. If he leases, he will have to pay a $800 security deposit, $1,000 down payment, and monthly payments of $480 over the 36-month term of the closed end lease (at the end of the lease he can simply turn in the car assuming he does no exceed the mileage limit or abuse the car). On the other hand, if he buys the car then he will have to make a $3,100 down payment and will finance the balance with a 36-month loan with 2% APR; he’ll also have to pay a 8% sales tax on the purchase price, and he expects the car to have a residual value of $20,500 at the end of the 3 year. Art can earn 3% interest on his savings. Use the automobile lease versus purchase analysis to find the total cost of both the lease and the purchase and then recommend the best strategy for Art.

Reference no: EM131868927

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