Foundations of math 11

Question

Veronica goes to a Toyota dealership and is shown that she can buy a $13,000 motorbike with financing of $425 per month for three years or lease the same bike for just $290 per month for three years. She thinks that clearly the leasing option is the much better deal. What advice would you give to Veronica? In your answer Veronica some pointers (at least two of each) about the positive and negative of leasing.

Answer 1

For an additional $4860, she will own the bike after 3 years and no longer have to pay to lease it. After 3 years, a bike originally worth 13000 should still be worth much more than 4860 after 3 years, despite depreciation. If she were to sell the bike after 3 years (simply taking into account the asset value), her overall cost of having the bike would be less than it would be leasing it. Leasing would only be a better option if she cannot afford to pay $425 per month, in which case I would not recommend getting a $13000 bike until she can afford to purchase it. The con of leasing is the higher long-term cost of having the bike. The pro is being able to have the bike with lower month-to-month payments which would only make financial sense if she wants to get a new bike after 3 years without having to deal with selling it.