Mona needs to determine whether to lease or buy a car for 4 years. The purchase price is $30,000 (including taxes and dealer fees). Her bank is offering the most competitive financing deal: 2% APR for a 4-year loan with 10% down payment. The dealer's 4-year lease agreement requires a monthly payment of $299 with a capitalized cost reduction of $2,000 and a $500 security deposit. The mileage allowance is well beneath her annual average. The estimated value of the car at the end of 4 years is $12,000. Without consideration for forgone interest, which will cost you more, leasing or buying?

Question

Quizplus · Accepted Answer

The total cost of leasing is lower than buying. The lease costs $299/month for 48 months plus the capitalized cost reduction and security deposit, totaling $16,852. The cost of buying includes the down payment and loan payments, totaling $19,617. The difference is $2,765, making leasing cheaper.

Mona Needs to Determine Whether to Lease or Buy a Car