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