Question
(20 points) You decided to get a Lexus (better than a lime green Civic) and have negotiated a price of $42,000 even though the MSRP
(20 points) You decided to get a Lexus (better than a lime green Civic) and have negotiated a price of $42,000 even
though the MSRP is 45,500. You are trying to decide between leasing it and buying it. In either case you will spend a
total of $10,000 at the time of delivery -- that's all you have right now so any up-front money has to come out of
that and not exceed that amount. You will have to finance any excess either via the lease or the loan described
below. Here are the options:
i. Lease it: Terms: 36 months, .64 residual, .00225 money factor, $250 lease processing fee (not taxable) due
at closing (time of purchase), a $300 security deposit (non-taxable and refundable at end of lease)
ii. Finance it: 5 years, monthly payments, 4.8%.
Please compare the alternatives, taking the time value of money into account. Which is best assuming you can
afford either and just want to get the car most efficiently? Briefly explain.
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