Situation:

You decide to buy a new car. You can choose any make and model of a new car but you

don't know whether to lease the car, or buy it. You do know that you are going to sell the

car or lease a new vehicle at the end of three years.

Assignment

Here is what you need to figure out:

1. If you buy the car, the financing terms on the loan will be for 5 years at 3% interest.

Remember, you will only keep the car for 3 years, making monthly payments. (Assume

100% financing)

Note: You will need to estimate what the value of the vehicle will be at the end of the

three years.

What is your net worth (positive or negative) for this scenario?

2. You decide to lease the car instead, for three years. Estimate the monthly lease

payment for this period (Assume no down payment or additional fees for this

assignment).

Note: The monthly lease will likely be less than the monthly loan payment. Remember to

account for the monthly savings difference. Put the monthly savings into a savings

account for 3 years at 0% annual interest.

What is your net worth (positive or negative) for this scenario?

3. Based on your results, which scenario should you choose?