How should a lease-versus-purchase analysis be conducted? How can this worksheet be applied to help you or someone else make their financing decision? Consider the following scenario: Should Sam lease or purchase? Sam is considering the purchase of a Mini Cooper and has negotiated a final price of $23,450. He's trying to decide whether to lease or purchase the vehicle. - If he leases, he'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 $318 over the four-year term of the closed-end lease. The Mini Cooper will have a residual value of $9,380. - On the other hand, if he buys the Mini Cooper, he'll have to make a 10% down payment, pay sales tax equal to 5% of the vehicle's price, and make monthly payments of $477 on a four-year loan that charges 4% interest. - Be aware that funds used as down payments and security deposits incur an opportunity cost of 4%, as they could have earned interest for Sam over the period of the lease or loan. LEASE Item Description (\$) Initial Payment 1a.CapitalCostReduction1b.1c.2.3.4.5.6.PaymentofInitialPayment7.SecurityDepositTotalInitialPaymentMumberofMonthsinLeaseOppotalPaymentsoverLeaseTermEstimatedEnd-of-TermChargesTotalCostofLeasing \begin{tabular}{ll} PURCHASE & Item Description \\ \hline 8. & Purchase Price \\ (\$) & Amount \\ 9. & Sales Tax on Purchase \\ 10. & Monthly Loan Payment \\ 11. & Total Payments over Term of Loan \\ 12. & Opportunity Cost of Down Payment \\ 13. & Estimated Vehicle Value at End of Loan \\ 14. & Total Cost of Purchase \\ 15. \end{tabular}