Antonio Di Capri is looking to get the new Alfa Romeo Giulia, a luxury sport sedan. He can either buy it at a retail price of $38,000 or get a lease from an auto dealership. The dealership offers a 5-year lease that requires an initial payment of $5,000 and monthly payment of $450. Purchasing requires a $2,500 down payment, sales tax of 22% and 60 monthly payments of $500. Antonio estimates that the value of the car will be $10,000 at the end of 5 years. He can earn 3% annual interest on his savings and is subject to a 22% sale tax on purchase.

Make a reasonable recommendation to Antonio, using a lease-versus-purchase analysis that, for simplicity, ignores the time value of money.

1. Calculate the total cost of leasing.

2. Calculate the total cost of purchasing.

3. Which option should Antonio choose?

Answer rating: 100% (QA)

Part a If Antonio get car on lease Initial Payment 500000 Month... View the full answer