Team #5 Presentation Buy or Lease a CarOur Situation:Option 1: PurchaseAnnual Worth AnalysisSensitivity AnalysisAnalysis ResultsSlide 7Comparing Time OwnedSlide 9Our Decision:Advantages and Disadvantages of LeasingReferencesTeam #5 PresentationTeam #5 PresentationBuy or Lease a CarBuy or Lease a CarOrganizer- Kenny KlingamanOrganizer- Kenny KlingamanTechie- Rolando ArevaloTechie- Rolando ArevaloSummarizer- Elizabeth YoungSummarizer- Elizabeth YoungOur Situation:Our Situation:•Chrysler 300 Chrysler 300 Reliable & safeReliable & safe–High qualityHigh quality–Good gas mileageGood gas mileage–SpaciousSpaciousBuy or Lease•Single 24 year old male engineer renting in La VerneSingle 24 year old male engineer renting in La Verne•Annual Salary of $60,000Annual Salary of $60,000•Good driving record and driving for 8 yearsGood driving record and driving for 8 years•Good CreditGood Credit•15,000 miles/ year15,000 miles/ yearOption 1: Option 1: PurchasePurchase•Base MSRP: $25,120Base MSRP: $25,120•Finance term: 48 Finance term: 48 monthsmonths•Very good credit: Very good credit: 8.5%8.5%•$4000 down $4000 down paymentpayment•Salvage Value: Salvage Value: 14,50014,500•Monthly payments: Monthly payments: $520.57$520.57Option 2: Option 2: LeaseLease•$4,000 down $4,000 down paymentpayment•Lease term: Lease term: 48months48months•Mileage option: Mileage option: 15,000 mi/yr15,000 mi/yr•Salvage Value: Salvage Value: $0.00$0.00•Monthly payment: Monthly payment: $367.00$367.00Annual Worth AnalysisAnnual Worth AnalysisBuy Cash FlowBuy Cash FlowN = 48$ 4,000A =877.12S =$ 0.00N = 48$ 4,000A =776.67S 14,500Lease Cash FlowLease Cash Flow•A consists of:A consists of:–Monthly PaymentsMonthly Payments–Maintenance ( oil changes)Maintenance ( oil changes)–InsuranceInsurance–Repairs ( Tires, brakes) Repairs ( Tires, brakes) –Gasoline (Annual mileage/mpg) x gas priceGasoline (Annual mileage/mpg) x gas priceSensitivity AnalysisSensitivity Analysis•Buying or LeasingBuying or Leasing•Various Down PaymentVarious Down Payment•Various Annual MileageVarious Annual Mileage•Comparing 3, 4, 5 yearsComparing 3, 4, 5 years•Mpg Mpg •Credit RatingCredit Rating•Gas PricesGas PricesAnalysis ResultsAnalysis Results•Down payments varied from $3,000 Down payments varied from $3,000 to $10,000to $10,000•Gas Prices Varied from $2.75- $5Gas Prices Varied from $2.75- $5•Credit Rating from 8%-12%Credit Rating from 8%-12%•Miles per Gallon from 16-24mpgMiles per Gallon from 16-24mpgAnnual Mileage Analysis•Mileage from 12,000 to 20,000Mileage from 12,000 to 20,000Comparing Time OwnedComparing Time OwnedAdjusting Salvage ValueAt just under $8000 we reach the same EUC as it was for a four year lease.Our Decision:Our Decision:•MSRP: $25,120MSRP: $25,120•Period: 4Period: 4•Buy salvage value: $14,500Buy salvage value: $14,500•Lease salvage value: $0.00Lease salvage value: $0.00•Buy: $9,320.04 (EUAC)Buy: $9,320.04 (EUAC)•Lease: $10,525.44 (EUAC)Lease: $10,525.44 (EUAC)•Difference: $1205.4/yrDifference: $1205.4/yr•Buying is a better choice Buying is a better choice because it has a lower because it has a lower Equivalent Uniform Annual Cost.Equivalent Uniform Annual Cost.Advantages and Advantages and Disadvantages Disadvantages of Leasingof Leasing•Advantages: Allows you Advantages: Allows you to continuously drive to continuously drive new cars, while having a new cars, while having a less monthly payment. less monthly payment. Also, leasing allows you Also, leasing allows you not to hassle with selling not to hassle with selling your car and possibility your car and possibility of tax reduction.of tax reduction.•Disadvantages: Leasing Disadvantages: Leasing vehicles have a yearly vehicles have a yearly mileage limit, higher mileage limit, higher insurance rates and insurance rates and overall higher EUAC.overall higher EUAC.•Advantages: You can sell Advantages: You can sell your car when you want to your car when you want to with no mileage with no mileage restrictions. Also you can restrictions. Also you can modify the car.modify the car.•Disadvantages: The Disadvantages: The vehicle may begin to vehicle may begin to break down, as the break down, as the warranty will end. The car warranty will end. The car will begin losing more will begin losing more value in the end.value in the end.Advantages and Advantages and Disadvantages of Disadvantages of BuyingBuyingReferencesReferences•www.kbb.comwww.kbb.com (Vehicle salvage value, advice (Vehicle salvage value, advice about lease vs. buy)about lease vs. buy)•www.chryslerfinancial.comwww.chryslerfinancial.com(Vehicle car (Vehicle car pricing information)pricing information)•www.consumerguide.comwww.consumerguide.com (More advice (More advice about lease vs. buy)about lease vs. buy)•www.progressive.comwww.progressive.com (insurance quotes) (insurance quotes)•Personal ExperiencePersonal Experience•Text (Annual Worth Analysis)Text (Annual Worth
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