Brent Groom David Tran

Luu Tran

Presentation Topics

Lease vs. Buy Comparison Sensitivity Analysis Decision Resources

Lease vs. Buy Comparison

Basic Assumptions for 5 years:

Buying Leasing

Car (2005)

Camry LE V6

Camry LE V6

Down $5000 $5000

Miles N/A 12,000

Credit 720 720

Leasing vs. Buying

Basic Research Results for the Toyota Camry V6 LE

Price $22,500

Down Payment $4,700

Nominal interest 6.07%

Leasing vs. Buying

Basic Research Results:

Buying Leasing

Monthly $387 $252

Salvage $8,800 0

Leasing vs. Buying

Basic Calculated Results:

Buy Lease

PMT $378 $252

Future Value

$32,815 $25,015

Analysis

Buy Lease

Re-paint Yes No

Payment Higher Lower

Mileage limit No Yes

Salvage value

Get to keep no

Analysis

Toyota Camry LE V6 Cash Flow Diagram

Buying(cal)

n = 60

$ 4,700

A = $378

S = $8,800

Leasing

n = 60

$ 4,700

A = $252

S = $0

Sensitivity Analysis

Variables: - Down Payment

- Leasing term (n)- Mileage

Sensitivity Analysis

Varying Down Payment

Down Payment

Buying PMT

Leasing PMT

0 $470 $344

2500 $421 $295

4700 $378 $252

Sensitivity Analysis

Varying termMonth Buying Leasing

36 $595 $372

48 $459 $297

60 $378 $252

Sensitivity Analysis

Varying the over mileagesMileages over Cost/mile Additional

charge

1000 $0.15 $150

2000 $0.15 $300

3000 $0.15 $450

Decision

Lease or buy, which one is better?- Lease allow lower monthly payment, always under warranty, and drive new car every 2 or 3 years.- Buy allow payment –free for a while, resale the car, and able to upgrade

Secret price quote.Cost of the car that is below the dealer invoice

Decision Monthly cost analysis Using EUAC:

Buying: $334Leasing: $334

• Another way of looking at it:

Buy Lease Difference

Monthly Payment

$378 $252 $126

Salvage $8800 0

In order to make $8800 in 60 months, need interest rate of .005058% or the nominal interest rate of 6.07%, which is the same as buying.

Leasing Formulas Residual = 60% *(MSRP) Net cap cost = Negotiate price - down Depreciation = (Net cap cost –

residual) / n Finance =(Net cap cost + residual) *

money factor PMT = Depreciation + Finance + Tax

ResourcesFor new/used car comparison

http://www.autos.yahoo.comFor information how to lease or buy

http://www.leaseguide.comFor the Secret Price Quote http://www.carpricesecrets.comFor Salvalge value and car price:

http://www.kbb.com//http://www.edmunds.com/http://www.cars.com/go/index.jsp?aff=nationalhttp://www.leasecompare.com/

Car- Lease v.s Buy