The Newtons New Car Decision: Lease vs. Purchase Farrah and Sam Newton, a dual-income couple in their
Question:
Critical Thinking Questions
1. What are some basic purchasing guidelines that the Newtons should consider when choosing which new car to buy or lease? How can they find the information they need?
2. How would you advise the Newtons to research the lease-versus-purchase decision before visiting the dealer? What are the advantages and disadvantages of each alternative?
3. Assume that the Newtons can get the following terms on a lease or a bank loan for the car, which they could buy for $17,000. This amount includes tax, title, and license fees. • Lease: 48 months, $245 monthly payment, 1 month’s payment required as a security deposit, $350 end-of-lease charges; a residual value of $6,775 is the purchase option price at the end of the lease. • Loan: $2,000 down payment, $15,000, 48-month loan at 5 percent interest requiring a monthly payment of $345.44; assume that the car’s value at the end of 48 months will be the same as the residual value and that sales tax is 6 percent.
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling