Julie Brown is a single woman in her late 20s. She is renting an apartment in the fashionable part of town for $1,200 a month. After much thought, shes seriously considering buying a condominium for $175,000. She intends to put 20 percent down and expects that closing costs will amount to another $5,000; a commercial bank has agreed to lend her money at the fixed rate of 6 percent on a 15-year mortgage. Julie would have to pay an annual condominium owners insurance premium of $600 and property taxes of $1,200 a year (shes now paying renters insurance of $550 per year). In addition, she estimates that annual maintenance expenses will be about 0.5 percent of the price of the condo (which includes a $30 monthly fee to the property owners association). Julies income puts her in the 25 percent tax bracket (she itemizes her deductions on her tax returns), and she earns an after-tax rate of return on her investments of around 4 percent.

Discuss the following:

1. In this case, what factors should be considered when making a housing rent-or-buy decision?
2. What factors should be considered when making a car lease-or-buy decision?
3. Which do you prefer strategy (no textbook reference needed)?