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Optimal Car Financing Decisions: Buy vs. Lease Analysis

This presentation by Juan Hernandez, Sean Guyer, Trevor Tran, and Jesus Rovira analyzes the financial implications of buying versus leasing a 2008 Honda Civic Sedan EX for a 24-year-old engineer with a 48-month term, $60k salary, and good driving record. Providing detailed cash flow diagrams, sensitivity analyses, and conclusions, it compares costs, maintenance, insurance, and different scenarios for making the best car financing decision. Utilizing resources from Cars.com, Bankrate.com, Leasetips.com, and Edmunds.com, it presents a comprehensive guide for evaluating whether to buy or lease based on individual circumstances.

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Optimal Car Financing Decisions: Buy vs. Lease Analysis

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  1. Team #5 Presentation Juan Hernandez- Organizer Sean Guyer- Summarizer Trevor Tran- Techie Jesus Rovira- Techie

  2. Our Situation • 24 year old engineer • Good driving record • 48 month term • 60k salary a year • 15,000 miles/year • 08 Honda Civic Sedan Ex • Reliable • Great on Gas • Very Popular Car

  3. MSRP- $20,145 Finance Term- 48 months 6.98% APR $3948.42 Down Payment Salvage Value-$9266.70 Monthly Payments- $412.96 $3948.42 Down Payment Lease Term- 48 months 7.24% APR Mileage Option- 15000mi/yr Salvage Value- 0 Monthly Payment- $222.10 Option 1- Purchase Option 2- Lease

  4. Assumptions • Buying Car • Sell car at the end of loan • MSRP is negotiable • Full purchase tax is added to loan • Leasing Car • Trade car in at the end of lease • Maintenance and Insurance will be the same

  5. Buy Car Lease Car Cash Flows Diagram S=$9266.70 S=0 A=$222.10 A=$412.96 P=$3948.42 P=$3948.42 n=48 months i=.5638% n=48 months i=.5841%

  6. Buy EUMC Lease EUMC EUMC Diagram EUMC=$316.65 EUMC=$339.66 • Leasing option is a better deal • This is based on our criterion

  7. Sensitivity Analysis • Down Payment • Term of Lease • Term of Purchase • Salvage Value • MARR • Releasing New Car With Same Initial MSRP

  8. Assumptions-Sensitivity Analysis • Buying • Insurance cost will drop as car depreciates • Maintenance will increase as ownership term increases • The offset between money saved on insurance and money spent on maintenance will be negligible • Leasing • Insurance and Maintenance will remain the same

  9. Analysis Results- Term

  10. Sensitivity Analysis Summarized

  11. Conclusion • NO Money Down does not really effect the EUAC of the loans much, however it increases the EUAC of the lease options. • By increasing the MARR you increase both the EUAC for the loans and the EUAC for the leases. • Also Note that by increasing the MARR the loan EUAC lines separate making the longer term loan more appealing. • So if you think you can get more for your money decrease your payments. • Leasing is better when ownership is below 66 months • After 66 months of ownership buying becomes the best option

  12. Resources • “Auto Leasing vs. Loan Calculator.” Cars.com. Cars.com. 15 Nov. 2008 <http://www.cars.com/go/advice/financing/calc/loanLeaseCalc.jsp>. • “Auto Loans.” Bankrate.com. Cars.com. 15 Nov. 2008 <http://www.bankrate.com/crc/rate/auto_home.asp>. • “Leasing Basics.” Auto Leasing Resource Center. Leasetips.com. 14 Nov. 2008 <http://www.leasetips.com/leasing_basics.htm>. • Reed, Philip. “Calculate Your Own Lease Payment.” Leasing Tips. Edmunds.com. 14 Nov. 2008 <http://www.edmunds.com/advice/leasing/articles/48365/article.html>. • “Residual Values.” Cars.com. Cars.com. 15 Nov. 2008 <http://www.cars.com/go/alg/index.jsp?makename=Honda&modelname=CIVIC+SDN&year=2008>.

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