engr econ buy v. lease

engr econ buy v. lease - $2,000 Total (future): $15,246.37...

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Olivia Nixon Engineering 111 26-Feb-10 Engineering Economics Homework Buy vs. Lease of a New Chevy Camaro for 5 years Constant Conditions: Cost: $25,000 Interest rate: 4% annually Monthly lease payment: $200 Up front Payment: $2,000 "What If" #1: Salvage Value = $15,000 BUY Present Cost: Future cost: $25,000 $30,464.13 Salvage Value $15,000 Total: $15,464.13 LEASE Monthly payment ($200) + Down Payment fv = $13,246.37 $2,000 Total (future): $15,246.37 "What If" #2: Salvage Value = $16,000 BUY Present Cost: Future cost: $25,000 $30,464.13 Salvage Value $16,000 Total: $14,464.13 LEASE Monthly payment ($200) + Down Payment fv = $13,246.37
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Unformatted text preview: $2,000 Total (future): $15,246.37 "What If" #3: Salvage Value = $17,000 BUY Present Cost: Future cost: $25,000 $30,464.13 Salvage Value $17,000 Total: $13,464.13 LEASE Monthly payment ($200) + Down Payment fv = $13,246.37 $2,000 Total (future): $15,246.37 This analysis of buy vs. lease of a car shows that the only time leasing a new Chevy Camaro will cost less than buying the car is when the salvage value is $15,000. At this salvage value, the savings will only be $217.76. Therefore if the salvage value is less than $15,000, it is more logical to lease rather than buy....
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This note was uploaded on 12/05/2011 for the course ENGR 111 taught by Professor Cardinal during the Winter '08 term at Cal Poly.

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