What is the total cost of leasing

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Reference no: EM133674333

Question

Felix is considering the purchase of a Porsche Boxster and has negotiated a final price of $48,100. He's trying to decide whether to lease or purchase the vehicle. If he leases, he'll have to pay a $500 security deposit, a capital cost reduction (down payment) equal to 10% of the vehicle's cost, and monthly payments of $652 over the four-year term of the closed-end lease. The Porsche will have a residual value of $19,240. On the other hand, if he buys the Porsche, he'll have to make a 10% down payment, pay sales tax equal to 8% of the vehicle's price, and make monthly payments of $977 on a four-year loan that charges 4% interest. Be aware that funds used as down payments and security deposits incur an opportunity cost of 4%, as they could have earned interest for Felix over the period of the lease or loan. What is the total cost of leasing?

Reference no: EM133674333

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