Question

Compare the relative advantages of lease versus purchase for a new vehicle.

You will need to find out the terms that are commonly available for leases and for loans for vehicle purchases. Suitable information sources might be advertisements or direct contact with lessors, lenders, or vendors. Note any differences in credit requirements between leasing and purchasing, but assume that you will qualify for whichever financing method you prefer.

You should make sure that the same period of time is chosen for the lease or the loan, typically three to five years.

The minimum information that you will need will include the monthly payment, the initial down payment or deposit required, and the value and disposition of the vehicle at the end of the loan/lease. You should try to determine the effective interest rates involved in any calculations. Be aware that there may be hidden “administrative” costs that create a difference between the advertised interest rate and the effective rate. For vehicles, the effective purchase price may be different for a lease than for a loan and may be different from a cash purchase price when promotional rates are involved.

You will also need to be clear about any terms for evaluating the condition of the vehicle at the end of the lease, and your responsibility for the financial impact of that evaluation.

Any option or obligation to purchase the vehicle at the end of the agreement, or to guarantee the value of the vehicle, will be part of the assessment and must be reported.  

Answer 1

A loan is the borrowing of money while a lease is a term rental agreement for the use of specific equipment. As a means of financing, loans and leases have different benefits.

firstly we know about pros and cons about loan and lease.

LOAN

Pros:

1. lower monthly payment
2. better warranty protection

cons:

1. must have stable predictable income
2. leases have strict mileage limits
3. likely to pay more over a time

LEASE

Pros:

1. ownership
2. freedom to make customization
3. no end-up lease charge

Cons:

1. high monthly payment
2. post-warranty repair charge

example:

This example below compares the prices of financing a car with a six-year loan vs. two back-to-back three-year leases, supported leasing a uniform car twice. The $2,000 cash due at signing is paid at the beginning of every three-year lease. This hypothetical example is predicated on a $29,429 2017 Mazda CX-5 Touring with an automatic drive . The figures are rounded to whole numbers.

	3 year back to back loan (figure in$)	6 year loan (figure in$)
down payment	-	2000
monthly payment	288	415
Cash Due at Signing	2000	-
interest rate	0.001	3%
Total Paid After 3 Years	12368	16940
Residual Value After 3 Years	16987	-
Total Paid After 6 Years	$24,664 (two leases back to back, including two payments of $2,000 at signing)	35498

Resale Value at Age 6

You don’t have a car to sell

9,650

Though the total expenditure for vehicle loan is higher, you should remember that the amounts paid can be considered as an investment as you will have the vehicle at the end of the tenure. However, in case of a vehicle lease, you spend lesser but will have to return the vehicle after completion of the specified period. Thus, if you like to switch between vehicle and are not keen on investing in a single vehicle, you can choose vehicle lease. However, individuals looking to own a vehicle should go for a vehicle loan.