Background Information
Your boss, a real estate business manager, has approached you for financial advice. She is
interested in either purchasing or leasing a new car for her personal use. Aware of your
financial expertise, she has asked you to develop a Spreadsheet Model that allows her to
decide whether to buy or lease the vehicle.
The retail price of the car she is interested in is $50,000.
Buy Scenario
In the Buy Scenario, your boss would like to purchase the car by making an initial down
payment of $15,000 dollars and finance the difference with a conventional car loan to be
repaid monthly for 3-years at a 5% interest rate. The following table summarises the relevant
information for the Buy Scenario.
Buy Scenario
Car Price $ 50,000.00
Down Payment $ 15,000.00
Interest Rate 5%
Term 3 years
UTS
Lease Scenario
In the Lease Scenario, there is no initial down payment. Instead, your boss would like to use
a Finance Lease to rent the car for 3 years. At the end of this 3-year period, she plans to
purchase the car from the lease financier (lessor) by paying a residual value of $25,000. In
this scenario, to rent the car, your boss would have to pay a monthly rent of $850 for 3 years.
The following table summarises the relevant information for the Lease Scenario.
Lease Scenario
Car Price $ 50,000.00
Residual Value $ 25,000.00
Monthly Rent $850
Term 3 years