You want to purchase a brand new 2016 BigUmer. Your nearest dealership, Big Moto

Question

You want to purchase a brand new 2016 BigUmer. Your nearest dealership, Big Motors, is selling itfor $25,000. You have enough cash in the bank, currently earning 15% interest (APR with monthlycompounding). Big Motors is also promoting the following two financing schemes:
A lease with $2,000 down, $450 per month for 36 months starting next month, and aresidual value of $18,000 in 3 years. Note that this means that you have the choice ofbuying the car in three years for $18,000 or simply giving it back to the dealership.

A 3-year, $5,000 down, 0% loan. Note that this means the car is yours after 36 monthlypayments.
After some research, you also find that 3-year-old used BigUmers sell for one third of their originalpurchase price in an active used car market (i.e. you have no trouble either buying or selling the carat that discounted price either today or in three years).
What is the optimal purchasing strategy?

A. Take the lease and buy the car at the end of the 3-year period

B. Take the lease, return the car at the end of the 3-year period and buy a used car

C. Take the loan  

D. Buy the car with cash

EXPLAIN WHY?

.

Explanation / Answer

Choose option B:

Take the lease, return the car at the end of the 3-year period and buy a used car.

Because,

After 3 years of use the car efficiency may be decreased.

Coming to costs pay lease payments for 36 months and get active used car for just 1/3rd of the original price which is beneficial and cost saving.

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