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Car Financing Decision Guide for Young Engineers

An in-depth analysis on buying versus leasing a Chrysler 300 for a 24-year-old engineer earning a $60,000 salary in La Verne. Includes cost breakdown, sensitivity analysis, and decision-making process.

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Car Financing Decision Guide for Young Engineers

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  1. Team #5 PresentationBuy or Lease a Car Organizer- Kenny Klingaman Techie- Rolando Arevalo Summarizer- Elizabeth Young

  2. Our Situation: Buy or Lease • Chrysler 300 Reliable & safe • High quality • Good gas mileage • Spacious • Single 24 year old male engineer renting in La Verne • Annual Salary of $60,000 • Good driving record and driving for 8 years • Good Credit • 15,000 miles/ year

  3. Option 1: Purchase Option 2: Lease • Base MSRP: $25,120 • Finance term: 48 months • Very good credit: 8.5% • $4000 down payment • Salvage Value: 14,500 • Monthly payments: $520.57 • $4,000 down payment • Lease term: 48months • Mileage option: 15,000 mi/yr • Salvage Value: $0.00 • Monthly payment: $367.00

  4. S =$ 0.00 S 14,500 N = 48 A =877.12 $ 4,000 N = 48 A =776.67 $ 4,000 Annual Worth Analysis Lease Cash Flow Buy Cash Flow • A consists of: • Monthly Payments • Maintenance ( oil changes) • Insurance • Repairs ( Tires, brakes) • Gasoline (Annual mileage/mpg) x gas price

  5. Sensitivity Analysis • Buying or Leasing • Various Down Payment • Various Annual Mileage • Comparing 3, 4, 5 years • Mpg • Credit Rating • Gas Prices

  6. Analysis Results • Down payments varied from $3,000 to $10,000 • Gas Prices Varied from $2.75- $5 • Credit Rating from 8%-12% • Miles per Gallon from 16-24mpg

  7. Annual Mileage Analysis • Mileage from 12,000 to 20,000

  8. Comparing Time Owned

  9. Adjusting Salvage Value At just under $8000 we reach the same EUC as it was for a four year lease.

  10. Our Decision: • MSRP: $25,120 • Period: 4 • Buy salvage value: $14,500 • Lease salvage value: $0.00 • Buy: $9,320.04 (EUAC) • Lease: $10,525.44 (EUAC) • Difference: $1205.4/yr • Buying is a better choice because it has a lower Equivalent Uniform Annual Cost.

  11. Advantages and Disadvantages of Leasing Advantages and Disadvantages of Buying • Advantages: You can sell your car when you want to with no mileage restrictions. Also you can modify the car. • Disadvantages: The vehicle may begin to break down, as the warranty will end. The car will begin losing more value in the end. • Advantages: Allows you to continuously drive new cars, while having a less monthly payment. Also, leasing allows you not to hassle with selling your car and possibility of tax reduction. • Disadvantages: Leasing vehicles have a yearly mileage limit, higher insurance rates and overall higher EUAC.

  12. References • www.kbb.com (Vehicle salvage value, advice about lease vs. buy) • www.chryslerfinancial.com (Vehicle car pricing information) • www.consumerguide.com (More advice about lease vs. buy) • www.progressive.com (insurance quotes) • Personal Experience • Text (Annual Worth Analysis)

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