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Leasing Versus Borrowing: Evaluating Alternative Forms of Consumer Credit

BENNIE H. NUNNALLY, JR. and D. ANTHONY PLATH
The Journal of Consumer Affairs
Vol. 23, No. 2 (Winter 1989), pp. 383-392
Published by: Wiley
Stable URL: http://www.jstor.org/stable/23859178
Page Count: 10
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Leasing Versus Borrowing: Evaluating Alternative Forms of Consumer Credit
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Abstract

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.

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