Lease versus Buy You are fresh out of college, have your first real job, and just received your first big paycheck. You decide you need some wheels. Off you go to the car dealer. You carefully review the various makes and models of cars, determine the price range you can afford, and select “YOUR FIRST CAR.” You thought that was the hard part. Now you need to decide on financing. The salesperson says you can either borrow money to purchase the vehicle or you can lease the car.

What factors should you consider in making this capital budgeting decision? Identify those factors that should enter into the lease versus buy decision. Prepare a short memo discussing the pros and cons of leasing versus buying and identifying the cash inflows and outflows associated with each option.