Question

FINA 3328 WEEK 2 - D2 How many of you would buy a car and how...

FINA 3328 WEEK 2 - D2

How many of you would buy a car and how many would lease if you had a choice right now? There are many legitimate reasons to buy or to lease; please use the textbook or any other sources to back up your answer.  

Homework Answers

Answer #1

Given an option to own vs. lease, in general, leasing the asset is economically better than owning the asset. The PV of leasing the asset is usually better than that of owning the asset. I will therefore prefer to lease the asset.

Reasons: Why i prefer leasing?

  1. There is no down payment required. Hence, there is no question regarding affordability.
  2. Lease payments are relatively lower than monthly mortgage payments and hence affording a lease payment is relatively easier than buying the asset on mortgage.
  3. If you are on a lease model, it's relatively easier to shift to a new model. Once you buy, you have to kind of stick with the same model or car for a few years at least.
  4. You don't have to get into the issues of depreciation. You pay one lease rental and the entire lease rental is tax deductible.
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