Cars: Buy v.s. Lease

1. Cars: Buy v.s. Lease Brent Groom David Tran Luu Tran

2. Presentation Topics • Lease vs. Buy Comparison • Sensitivity Analysis • Decision • Resources

3. Lease vs. Buy Comparison • Basic Assumptions for 5 years:

4. Leasing vs. Buying • Basic Research Results for the Toyota Camry V6 LE

5. Leasing vs. Buying • Basic Research Results:

6. Leasing vs. Buying • Basic Calculated Results:

7. Analysis

8. Leasing S = $0 S = $8,800 n = 60 A = $252 n = 60 $ 4,700 A = $378 $ 4,700 Analysis Toyota Camry LE V6 Cash Flow Diagram Buying(cal)

9. Sensitivity Analysis • Variables: -Down Payment - Leasing term (n) - Mileage

10. Sensitivity Analysis • Varying Down Payment

11. Sensitivity Analysis • Varying term

12. Sensitivity Analysis • Varying the over mileages

13. Decision • Lease or buy, which one is better? - Lease allow lower monthly payment, always under warranty, and drive new car every 2 or 3 years. - Buy allow payment –free for a while, resale the car, and able to upgrade • Secret price quote. Cost of the car that is below the dealer invoice

14. Decision • Monthly cost analysis Using EUAC: Buying: $334 Leasing: $334 • Another way of looking at it: In order to make $8800 in 60 months, need interest rate of .005058% or the nominal interest rate of 6.07%, which is the same as buying.

15. Leasing Formulas • Residual = 60% *(MSRP) • Net cap cost = Negotiate price - down • Depreciation = (Net cap cost – residual) / n • Finance =(Net cap cost + residual) * money factor • PMT = Depreciation + Finance + Tax

16. Resources For new/used car comparison http://www.autos.yahoo.com For information how to lease or buy http://www.leaseguide.com For the Secret Price Quote http://www.carpricesecrets.com For Salvalge value and car price: http://www.kbb.com// http://www.edmunds.com/ http://www.cars.com/go/index.jsp?aff=national http://www.leasecompare.com/

17. Car- Lease v.s Buy The End