Premium
Leasing Versus Borrowing: Evaluating Alternative Forms of Consumer Credit
Author(s) -
NUNNALLY BENNIE H.,
PLATH D. ANTHONY
Publication year - 1989
Publication title -
journal of consumer affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.582
H-Index - 62
eISSN - 1745-6606
pISSN - 0022-0078
DOI - 10.1111/j.1745-6606.1989.tb00253.x
Subject(s) - lease , order (exchange) , cash , economics , cash flow , finance , business , actuarial science , microeconomics
A straightforward method for evaluating lease versus borrow (buy) decisions facing consumers is presented and illustrated with actual financing cost data reported to new car purchasers. In general, individuals should consider the after‐tax cash flows associated with alternative borrowing arrangements, the period of time in which these cash flows occur, and the opportunity cost of capital in order to identify the least costly financing alternative. The decision framework provided in this article can be used to make informed and intelligent choices between alternative types of consumer credit contracts.