The total costs incurred in the three options analyzed form the basis of the choice preferred. As can be seen from the analysis, the buying option based on the chosen parameters and values is better considering especially if a higher deposit is given. It is recommended that one buys the car by paying a higher deposit amount.
Should we lease or buy a car? This is the managerial question that the company seeks to answer. Buying or leasing is a very familiar question in the present age. In the United States, leasing accounted for close to 42 percent of the total new cars purchased in 2000. It is important to note that the number is increasing at a considerable rate. It is estimated that more cars that are new will be leased in the future. Leasing is defined as the process renting for a particular period or amount of time. As a result, the individual pays only a portion of the item value and not its total value. Majority of the automobiles are leased and the lease generally lasts for 2 to 5 years. The individual or the organization puts up the initial security deposit and it is generally a one to two months advance lease expense (Royale Management Services, 2001).
There are several benefits of buying or leasing a car. Benefits to buying include lack of restrictions as to how many miles per year the car can be driven, the car can be sold because it has some residual value, and the absence of insurance issues linked to premature termination. Other benefits include that the car be treated in any way the individual or the company wishes this were because there are no turn-in issues associated with the residual value. If an investment type loan like home equity is utilized to finance the purchase of the car, the interest charges can be deducted on the individual’s or the company’s tax return (Royale Management Services, 2001).