Buying or Leasing a Vehicle

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To Buy or Lease A Toyota Prius?
To Buy or Lease A Toyota Prius?

Buying or leasing a vehicle is a decision that can be a very controversial and it can be best approached by applying an analytical analysis to reflect self interest. This report approaches this decision by analyzing present and future benefits to approach to the best alternative.

Buying or leasing a vehicle is a decision that can be a very controversial and it can be best approached by applying an analytical analysis to reflect self interest. This report approaches this decision by analyzing present and future benefits to approach to the best alternative.

Table of Contents

Cover Letter…………………………………………………………………………………………………………………………………………….3
Executive Summary4
Introduction5
Investigative Method6
Results and Discussion9
Purchasing the Vehicle with financing (loan)9
Purchasing the Vehicle Outright with Cash11
Leasing and Returning Vehicle after Leasing Period Ends12
Leasing and Buying Vehicle after Leasing Period Ends14
Recommendations15
References16

Figures
Figure 1 :Cash Flow Diagram for Purchasing a car with a loan11
Figure 2 : Cash Flow Diagram for Buying with Cash12
Figure 3 : Cash Flow Diagram (Lease and Return)13
Figure 4 : NPV Comparison14

Tables
Table 1 : Local Insurance Premium8

Executive Summary

With the technological developments to improve hybrid vehicles, Toyota’s Prius has become an even more popular vehicle choice in recent years. The 2013 Toyota Prius uses both a gas and electric engine to save gasoline and lower its carbon emissions during operation. This makes the vehicle a fairly environmentally option for consumers concerned with the accumulation of greenhouse gases in the atmosphere. The Prius comes with all of the automatic features that consumers have come to know and love in their cars, as well as remote keyless entry.

Several factors should be considered when purchasing a Prius. Because Priuses are expensive, more affordable vehicles should be considered when acquiring a new car. However, it is worth noting that the licensing fees, annual maintenance, and insurance premiums are low for Toyota Priuses. Insurance premiums are particularly low if the consumer is already considered a low risk driver. The Prius will be more cost effective for the consumer that lives in urban areas, because the Prius saves more gas on surface streets where the likelihood of being able to operate on its electric motor is higher. The Prius get excellent gas mileage which will result in savings at the gas pump, but how quickly the consumer will recoup savings in gasoline to offset the cost of their Prius is highly variable and dependent on the price of gas. The higher gas prices are, the faster the money will be recouped.

The new 2013 Prius is available for purchase and lease from Toyota. The 2013 Prius is still fairly expensive compared to most compact cars, but the prices are dropping all the time as hybrid technology becomes more commonplace. Multiple avenues are available for acquiring a new Toyota Prius to drive home. The three options explored in this report are purchasing with cash, purchasing with financing from a four year loan, and leasing the car over a four year period. When leasing, there is also the option to purchase the vehicle at the end of the leasing period for the agreed upon residual value of the vehicle set at the lease signing. This scenario is not exactly comparable because car payments still have to be paid after the end of the lease, but for interested parties, the implications of this option are discussed.

Overall, this report finds that if the consumer has the option, the 2013 Toyota Prius should be leased for the four year period. Leasing is the cheapest option for the consumer at high discount rates, meaning that assuming there are other bills the consumer could be paying that have a larger interest rate than the one on their car...
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