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Should Mai Lease or Purchase? Mai is considering the purchase of a Mini Cooper and has negotiated a final price of $23,450. She's trying
Should Mai Lease or Purchase? Mai is considering the purchase of a Mini Cooper and has negotiated a final price of $23,450. She's trying to decide whether to lease or purchase the vehicle. If she leases, she'll have to pay a $550 security deposit, a capital cost reduction (down payment) equal to 10% of the vehicle's cost, and monthly payments of $415 over the three-year term of the closed-end lease. The Mini Cooper will have a residual value of $9,380. On the other hand, if she buys the Mini Cooper, she'll have to make a 10% down payment, pay sales tax equal to 5% of the vehicle's price, and make monthly payments of $623 on a three-year loan that charges 4% interest. Be aware that funds used as down payments and security deposits incur an opportunity cost of 3%, as they could have earned interest for Mai over the period of the lease or loan.
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