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Buy or Lease a Car: Making the Right Financial Decision

When deciding whether to buy or lease a car like the Lexus IS 250, consider factors like MSRP, credit, down payment, monthly payments, and salvage value. Explore the advantages and disadvantages of both options to make an informed choice based on your financial goals. Our presentation includes an annual worth analysis, sensitivity analysis, and detailed comparison over a 5-year period. Discover why buying may be the smarter long-term investment.

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Buy or Lease a Car: Making the Right Financial Decision

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  1. Team #6 PresentationBuy or Lease a Car Joyce Barcimo - Presenter Brian Lombardi - Tech Malika Singh - Organizer

  2. Our Situation: Buy or Lease • Lexus IS 250 • Reliable & safe • High quality • Good gas mileage • Good resale value

  3. Option 1: Buy • Base MSRP: $31,425 • Finance term: 60 months • Very good credit: 8.3% • $10,000 down payment • Salvage Value: $ 12,885 • Monthly payments: $438

  4. Option 2: Lease • $10,000 down payment • Lease term: 60 months • Mileage option: 15,000 mi/yr • Salvage Value: $0.00 • Monthly payment: $236

  5. S =$ 0.00 S =$ 12,885 N = 60 N = 60 A = 232 A = 432 $ 10,000 $ 10,000 Annual Worth Analysis Lease Cash Flow Buy Cash Flow

  6. Sensitivity Analysis • Buying or Leasing • Various Down Payment • Various APR’s • Different Financial Periods

  7. Various Down Payments and Years • 3 to 5 year range • Down payments varied from $0 to $10,000 • Buying is better for the long-term (5 years) • Leasing is better for the short-term (3 years)

  8. Various APR’s and Financial Periods • 3 to 5 years • Down payment: $10,000 • Different APR’s did not affect mo. pmt. very much • Buying is better for the long-term (5 years) • Leasing is better for the short-term (3 years)

  9. Our Decision: • MSRP: $31,425 • Period: 5 years • Buy salvage value: $12,885 • Lease salvage value: $0.00 • Buy: $5,749.69 (EUAC) • Lease: $7,932.92 (EUAC) • Difference: $2183.83/yr • Buying is a better choice because it has a lower Equivalent Uniform Annual Cost.

  10. Advantages and Disadvantages of Leasing • 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. • Disadvantages: Leasing vehicles have a yearly mileage limit, higher insurance rates.

  11. 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.

  12. References • www.kbb.com (Vehicle salvage value, advice about lease vs. buy) • www.lexus.com (Vehicle car pricing information) • www.autos.msn.com (More advice about lease vs. buy) • Text (Annual Worth Analysis)

  13. Our Decision: • MSRP: $31,425 • Period: 5 years • Buy salvage value: $12,885 • Lease salvage value: $0.00 • Buy: $5,749.69 (EUAC) • Lease: $7,932.92 (EUAC) • Difference: $2183.83/yr • Buying is a better choice because it has a lower Equivalent Uniform Annual Cost.

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