Team

1
Team 5 PresentationBuy or Lease a Car

• Organizer- Kenny Klingaman
• Techie- Rolando Arevalo
• Summarizer- Elizabeth Young

2
Our Situation
Buy or Lease

• Chrysler 300 Reliable safe
• High quality
• Good gas mileage
• Spacious

• Single 24 year old male engineer renting in La
  Verne
• Annual Salary of 60,000
• Good driving record and driving for 8 years
• Good Credit
• 15,000 miles/ year

3
Option 1 Purchase
Option 2 Lease

• Base MSRP 25,120
• Finance term 48 months
• Very good credit 8.5
• 4000 down payment
• Salvage Value 14,500
• Monthly payments 520.57

• 4,000 down payment
• Lease term 48months
• Mileage option 15,000 mi/yr
• Salvage Value 0.00
• Monthly payment 367.00

4
Annual Worth Analysis

• Buy Cash Flow

Lease Cash Flow

• A consists of
• Monthly Payments
• Maintenance ( oil changes)
• Insurance
• Repairs ( Tires, brakes)
• Gasoline (Annual mileage/mpg) x gas price

5
Sensitivity Analysis

• Buying or Leasing
• Various Down Payment
• Various Annual Mileage
• Comparing 3, 4, 5 years
• Mpg
• Credit Rating
• Gas Prices

6
Analysis Results

• Down payments varied from 3,000 to 10,000
• Gas Prices Varied from 2.75- 5
• Credit Rating from 8-12
• Miles per Gallon from 16-24mpg

7
Annual Mileage Analysis

• Mileage from 12,000 to 20,000

8
Comparing Time Owned
9
Adjusting Salvage Value
At just under 8000 we reach the same EUC as it
was for a four year lease.
10
Our Decision

• MSRP 25,120
• Period 4
• Buy salvage value 14,500
• Lease salvage value 0.00
• Buy 9,320.04 (EUAC)
• Lease 10,525.44 (EUAC)
• Difference 1205.4/yr
• Buying is a better choice because it has a lower
  Equivalent Uniform Annual Cost.

11
Advantages and Disadvantages of Leasing
Advantages and Disadvantages of Buying

• Advantages Allows you to continuously drive new
  cars, while having a less monthly payment. Also,
  leasing allows you not to hassle with selling
  your car and possibility of tax reduction.
• Disadvantages Leasing vehicles have a yearly
  mileage limit, higher insurance rates and overall
  higher EUAC.

• Advantages You can sell your car when you want
  to with no mileage restrictions. Also you can
  modify the car.
• Disadvantages The vehicle may begin to break
  down, as the warranty will end. The car will
  begin losing more value in the end.

12
References

• www.kbb.com (Vehicle salvage value, advice about
  lease vs. buy)
• www.chryslerfinancial.com (Vehicle car pricing
  information)
• www.consumerguide.com (More advice about lease
  vs. buy)
• www.progressive.com (insurance quotes)
• Personal Experience
• Text (Annual Worth Analysis)