LEASE FACTS:

Down Payment $ 1,500.00

Lease Term 36 Months

Lease Payments $ 189.00 Per month

Month Buy Out Price - End of Lease $ 12,000.00

Market Loan Rate 8%

Sales Tax 6.75%

Title Fee $ 15.00

Your Highes Credit Card Rate 15.00%

Outright Purchase of Car (Before tax and title) $17,000.00

Assume that you can buy the vehicle for $17,000 before tax and title. What is the NPV of the car if you lease?

Assume that you can buy the vehicle for $17,000 before tax and title. What is the NPV of the car if you buy?

Now Assume that the lease and buy are both reasonable values and that you are paying a 15% interest rate (after tax) on credit card debt. You also plan to keep the vehicle beyond the lease term. In other words, you would exercise the purchase option at the end of the lease term.

Assume further that you take advantage of the opportunity to pay off credit card debt with the monthly lease savings.

What is the NPV of the lease?

Assume further that you do not take advantage of the opportunity to pay off credit card debt with the monthly lease savings.

What is the NPV of the lease?