If you are considering the purchase of a new car, input your actual information in the template to

compare the purchase versus the option to lease the car. Even if you are not planning to purchase

or lease a new car, use the information quoted by a specific car dealer (go to any car dealer Web

site to obtain a quote). If you cannot obtain actual data, use the following data to assess the buy

versus lease decision. Assume that you received the following offer:

Option 1: Purchase a car with $2,000 down. If you invested those funds instead, you could earn 3%. You would borrow the remaining money over a 48-month period, and your loan payment would be $450 per month. You believe you could sell the car for $10,000 at the end of 4 years. Option 2: Lease the car with a $1,000 security deposit. Your monthly lease payment would be $300 per month over 48 months.

(HINT: If you run the analysis properly, the total cost of purchasing the car should be less than the total cost of leasing by about $680 but show your analysis that leads to this outcome.)

Cost of Purchasing the Car
Down payment
Interest rate
Number of months
Forgone interest on down payment
Monthly payment on car loan
Total monthly payments
Total
Expected amount to be received when car is sold
Total cost of purchasing
Cost of Leasing the Car
Security deposit
Forgone interest
Monthly lease payment
Total monthly payments
Total cost of leasing