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Lease vs Finance.doc

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Simon Fraser University
Business Economics
BUEC 232

Here, I am going to show you the difference between leasing and financing 1. Leasing a brand new car: Let's take a look at Audi A4 for example: A brand new Audi a4 cost $37,800. Leasing it: You only pay a portion of the total value of your car. The car is $37,800, but you only need to lease a portion of it. Let say now it is on promotion, with 2.9% interest rate, 48months term and you only need to pay $365.15/month with down payment of $8000. So, it means that after 48months, you already paid 48monthsX$365.15=$17,527, and plus your down payment of $8000. Which is 8000+17,527=25,527$. However, this 25,527 is only a portion of your car that you "used up" during the 48months. You are now left with the $37,800(original price)- $25,527(amount you paid in 48months+down payment)=$12,273 Now, this $12,273, you can deal with the dealer, but at this moment, you can ONLY choose to 1.Finance the remaining $12,273(Finance means to borrow money from bank, and pay them back in certain period of time) OR 2.Cash out the car(means to pay $12,273 immediately then the car is all yours) OR 3. Stop leasing the car, return the car to the dealer(in this case, you have paid $25,527 to borrow the car for 48months, and you do not have access to the car anymore, since you return it) A4 2. Financing a brand new car: Finance it: In this way, it is simple to understand. For instance, I am getting a used 2008 Audi a4, which costs about $35,000. For any used car, we can only finance it. (Unless specify by dealer) With finance, it means that to borrow the WHOLE value from the bank, in this case, borrow $35,000 from the bank (but the dealer will do this for you, so I don’t have to deal with the bank or ask for any credit or anything). BUT, with financing a car, I have to p
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