Amanda Forsythe of Tampa, Florida, must decide whether to buy or lease a car she has selected. She has negotiated a purchase price of $24,700 and could borrow the money to buy from her credit union by putting $3000 down and paying $515 per month for 48 months at 6.5 percent APR. Alternatively, she could lease the car for 48 months at $310 per month by paying a $3000 capital cost reduction and a $350 disposition fee on the car, which is projected to have a residual value of $8100 at the end of the lease. Use the Run the Numbers worksheet on page 232 to advise Amanda about whether she should buy or lease the car.

Worksheet from page 232

1. monthly lease payment (36 payments of $375, for example) $13,500 2. Plus acquisition fee* (if any) Plus disposition charge* (if any) Plus estimate of excess mileage charges* (if any) Plus projected residual value of the vehicle 3. amount for which you are responsible under the lease 4. Less the adjusted capitalized cost (gross capitalized cost* less the capitalized cost reductions*) 5. Dollar cost of leasing to be compared with a finance charge if you purchased the vehicle