That can be a complicated question. Overall, buying would be better unless she can answer yes to all of these questions.
1. Do you plan on keeping the car only a few years?
2. Do you drive only 12,000 miles or so a year?
3. Do you plan on buying a new car every few years?
4. Do lack a large down payment?
Overall leasing cars like Fords, GM
, Chrysler etc is a bad deal
Look at leasing cars with strong residual values such as BMW, Mercedes, Honda, Acura, Lexus.
Typically the way a lease is computed is as follows.....
I will use a car with a MSRP of $24,000.00
So say you negotiate a price of $22,000.00
The bank says the cars residual value is 50% over a three year lease. In other words the bank says the future value of the car will be $12,000 at the end of the lease.
So say you have the price of $22,000.00 and you put down $2,000.00
so you will be paying for $8,000.00 of depreciation. That would be your adjusted "Cap Cost" .
Now depending on how the lease is structured count on an "aquisition fee" of around $500-$700 or so. That is what the bank charges to get the whole thing going.
Now also depending on the state, you may have to pay sales tax up front, some states such as California adds the tax onto the monthly payment. This is the formula I will use to compute the lease.
So here we go
Adjusted Cap Cost is $22,500.00 (assuming a $500 aquisition fee)
State License say $350.00
Now you will pay your $2000.00 down so that leaves
$8850 is the amount of depreciation that you will pay
Take that $8850 and divide it over the term of the lease for your monthly depreciation.....this is a 36 month lease so that comes out to $245.83 for monthly depreciation....
Now the bank wants to make money so that is called "rent charge". It is computed using a "money factor".
The money factor is decimal number. If you have good credit it should be around .00205-.00305. If you want to compute that to an APR multiply the money factor by 2400. So we will use .00305x2400=7.32% APR..
But that is for reference only.
To get your monthy rent charge take your residual value and add it to the adjusted cap cost....12000+22000=34000.
Take the 34000 and multiply it by the money factor so $34000x.00305=103.78
Take the 103.78 and add it to the monthy depreciation and you get $349.48.
for 36 months
That should be pretty close to what you payment would come out to, within a few dollars..
Now if you were to BUY
that same car your payment would run $487 for 5 years...assuming still the same $2000.00 down.
But it really depends on you daughters own personal preference. Be VERY careful with a lease, it is real easy to get burried. Before I worked for AA
I spent 7 years selling and working in finance offices at large cardealer ships.
email me if I can assist you in any way.
Oh one more thing. Getting out of a lease BEFORE THE END OF THE LEASE is very difficult, unless you bring lots of $$$$ with you.
[Edited 2006-05-10 02:59:24]