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16 October, 08:30

You are considering a car with no down payment and monthly payments of $550 for 48 months and an estimated value at the end of the loan term of $8,000. A comparable model can be leased for $550 a month for 36 months with end-of-lease costs of $1,800. Which arrangement should you choose?

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  1. 16 October, 09:48
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    I would choose to buy the car with no down payments and monthly payments of $550 for 48 months

    Explanation:

    Purchase of car

    Down payment = 0

    Monthly payment = $550

    Duration = 48 months

    End of the loan term value = $8000

    Purchase = ($550 x 48) - 8000 = $18,400

    Lease of Car

    Monthly lease = $550

    Duration of lease = 36 months

    End of lease cost = $1800

    Lease = ($550 x 36) + $1800 = $21,600

    From the calculation above, it takes the buyer 18,400 dollars to buy the car in 4 years, whereas the person who want to lease the car for 3 years spends more at 21,600 dollars and still does not own the car. Hence the wise choice will be to purchase the car rather than lease it.
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