5. The lease versus purchase analysis - Part 2 Which is better; to lease or to buy? A car buyer has two financing aiternatives: to lease or to purchase. It is important to evaluate all the options and analyze the consequences of lease versus purchase decision. The understanding of a comparative worksheet that analyzes the automobile lease versus purchase decision will help in making an informed choice. How should a lease-versus-purchase analysis be conducted? How can this worksheet be applied to help you or someone else make their firancing decision? Consider the following scenario: Should Juanita lease or purchase? Juanita is considering the purchase of a Ford F-150 Pickup and has negotiated a final price of $27,690, She's trying to decide whether to lease or purchase the vehicle. - If she leases, she'll have to pay a $500 security deposit, a capital cost reduction (down payment) equal to 10% of the vehicle's cost, and monthly payments of $375 over the four-year term of the closed-end lease. The truck will have-a residual value of $11,076 - On the other hand, if she buys the truck, she'll have to make a 10% down payment, pay sales tax equal to 7% of the vehicle's price, and make monthly payments of $563 on a four-vear loan that charges 4% interest. - Be aware that funds used as down payments and security deposits incur an opportunity cost of 5%, as they could have eamed interest for Juanita over the period of the lease or loan. Use the automobile lease-versus-punchase analysis worksheet that follows to determine the total cost of both the lease and the purchase strategy for Juanita. To complete the worksheet, enter the appropriate values in their corresponding blanks. (Note: Round each value to the nearest whole dollar. Use the automobile lease-versusvpurchase analysis worksheet that foliows to determine the total cost of both the lease and the purchase strategy for Juanita. To complete the worksheet, enter the appropriate values in their corresponding blanks. (Note: Round each value to the nearest whole dollar.) Based on this analysis, Juanita should: Use the ioan to purchase the truck, because its total cost is less than the total cost of a lease transaction. Use the lease to purchase the truck, because its total cost is less than the total cost of a loan transaction. Use the lease to purchese the truck, because its total cost is greater than the total cost of a purchase transaction