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Lease versus Purchase

Danny is considering buying a new computer. The computer is $2,090.00. Should Danny purchase it outright, or lease it?

A purchase would be done via credit card, financed at 15%, with payments of 100 dollars per month applied.

Here are the terms for his three lease options:

FML Lease
Months Payment/mo Total$
........................
24 $87 = 2088
30 $69 = 2070
36 $71 = 2556
48 $58 = 2784

1D1 Lease:
Months Payment/mo Total$
........................
36 $74 = 2664
30 $84 = 2520
48 $59 = 2832
24 $103 = 2472

9oD Lease:
Months Payment/mo Total$
........................
27 $86 = 2322
33 $74 = 2442
39 $70 = 2730

What is the better decision to make -- lease or buy, in today's dollars? If leased, which lease method should be taken?

Solution Preview

This would be the payment schedule if Danny decided to purchase the computer on his credit card:

Financial Details:

Interest compounding: Monthly
Interest rate: 15.000%
Loan amount: $2,090.00
Payment amount: $100.00
Total payments: $2,437.16
Total finance charge: $347.16

Payment schedule:

Amortization Schedule
Event Date PaymentInterest Principal Balance
Loan 07-30-2007 2,090.00
1 08-30-2007 100.00 26.13 73.87 2,016.13
2 09-30-2007 100.00 25.20 74.80 1,941.33
3 10-30-2007 100.00 24.27 75.73 1,865.60
4 11-30-2007 100.00 23.32 76.68 1,788.92
5 12-30-2007 100.00 22.36 77.64 ...

$2.19