Antonio Di Capri is looking to get the new Alfa Romeo Giulia, a luxury sport sedan. He can either buy it at a retail price of $38,000 or get a lease from an auto dealership. The dealership offers a 5-year lease that requires an initial payment of $5,000 and monthly payment of $450. Purchasing requires a $2,500 down payment, sal
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Antonio Di Capri is looking to get the new Alfa Romeo Giulia, a luxury sport sedan. He can either buy it at a retail price of $38,000 or get a lease from an auto dealership. The dealership offers a 5-year lease that requires an initial payment of $5,000 and monthly payment of $450. Purchasing requires a $2,500 down payment, sales tax of 22% and 60 monthly payments of $500. Antonio estimates that the value of the car will be $10,000 at the end of 5 years. He can earn 3% annual interest on his savings and is subject to a 22% sale tax on purchase.
Make a reasonable recommendation to Antonio, using a lease-versus-purchase analysis that, for simplicity, ignores the time value of money.
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Calculate the total cost of leasing.
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Calculate the total cost of purchasing.
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Which option should Antonio choose?
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