The
following assumptions were made for
this analysis:

A
new 2006 Honda Accord is
purchased for MSRP of $21,700.
At the end of 10 years it is
sold for 15% of its original
MSRP ($3,255), and then this
number is adjusted for 3% annual
inflation. This number is
similar to what 10 yearold
Honda Accords are selling for
today.

A
new Honda Accord is leased every
four years. A cap cost
equal to MSRP is assumed each
time. When the lease is
renewed, we assume that lease
payments increase 10%, which
translates to an annual
inflation rate of 2.25%.
Vehicle prices have been very
soft recently, and with
worldwide overcapacity, it is
hard to imagine large increases
in vehicle prices anytime in the
foreseeable future.

For
the vehicle purchase, it is
assumed that it is financed over
4 years at 6.5% interest.

A
general inflation rate of 3% is
assumed over the 10year
evaluation period.

Insurance starts at $1,000 for
each vehicle. The
insurance on the purchase stays
at $1,000 for the entire
evaluation period as inflation
balances out decreases in the
value of the vehicle. For
the leased vehicle, the
insurance is the same for the
four years but increases by 10%
at the beginning of each lease
term to account for the
increased value of each vehicle
purchased.

Property tax starts out at $500
for each vehicle and then
decreases 10% per year as the
vehicle value decreases.
For the leased vehicle, the
property tax is increased with
each new lease to reflect
inflation and then decreases 10%
again each year.

Maintenance and repairs are $30
per month per vehicle and then
increase 3% per year. This
number includes washes and
details. For the purchased
vehicle, maintenance and repairs
increase to $75 per month in
years five and six, $100 per
month in years seven and eight,
and to $100 per month in years
nine and ten. All figures
are adjusted by 3% per year for
inflation.

Gasoline is calculated on an
average of 25 miles per gallon
and 15,000 miles driven each
year. For the leased
vehicles, gas mileage increases
20% each time the lease is
renewed. Gasoline is $3.00
per gallon the first year and
increases 3% per year.
The
table below shows the total costs of
ownership under the purchase and
lease scenarios. It costs an
estimated total of $65,769 to
purchase a 2006 Honda Accord and
keep it for 10 years.
Discounted at 8%, this comes to a
Net Present Value of Ownership of
$47,882. It costs a total of
$80,969 to lease a 2006 Honda Accord
and to replace it with a new Honda
Accord every four years.
Discounted at 8%, this comes to Net
Present Value of $53,826. So
the difference between leasing a new
vehicle every four years and
purchasing and keeping it for 10
years is $127 per month or $50 per
month in Net Present Value terms.
Our
guess is that this difference is
significantly smaller than you would
have guessed. Our analysis
also doesn't take into account any
of the new standard features or
safety measures that will be built
into new vehicles, or the value of
your time when dealing with the
inevitable repairs that you will
experience with the older vehicle.
This is obviously a lifestyle issue
that you may now look at a little
differently.
Cost of Owning 2006
Honda Accord 
Item 
Year 1 
Year 2 
Year 3 
Year 4 
Year 5 
Year 6 
Year 7 
Year 8 
Year 9 
Year 10 
Total 
Monthly Payment 
$6,288 
$6,288 
$6,288 
$6,288 






$25,152 
Insurance 
$1,000 
$1,000 
$1,000 
$1,000 
$1,000 
$1,000 
$1,000 
$1,000 
$1,000 
$1,000 
$10,000 
Property Taxes 
$
500 
$
450 
$
405 
$
365 
$
328 
$
295 
$
266 
$
239 
$
215 
$
194 
$ 3,257 
Maint/Repairs 
$
360 
$
371 
$
382 
$
393 
$1,013 
$1,043 
$1,432 
$1,476 
$2,280 
$2,349 
$11,100 
Gasoline 
$1,800 
$1,854 
$1,910 
$1,967 
$2,025 
$2,087 
$2,149 
$2,214 
$2,280 
$2,349 
$20,635 
Resale of Vehicle 










$(4,375) 












Total 
$9,948 
$9,962 
$9,985 
$10,013 
$4,367 
$4,425 
$4,848 
$4,929 
$5,776 
$1,516 
$65,769 
NPV @ 8% 
$9,211 
$8,542 
$7,926 
$ 7,360 
$2,972 
$2,789 
$2,829 
$2,663 
$2,889 
$ 702 
$47,882 












Cost of Leasing
Honda Accords 
Item 
Year 1 
Year 2 
Year 3 
Year 4 
Year 5 
Year 6 
Year 7 
Year 8 
Year 9 
Year 10 
Total 
Initial Lease Fee 
$
197 



$
217 



$
238 

$
653 
Lease Payment 
$3,936 
$3,936 
$3,936 
$3,936 
$4,330 
$4,330 
$4,330 
$4,330 
$4,763 
$4,763 
$42,587 
Insurance 
$1,000 
$1,000 
$1,000 
$1,000 
$1,100 
$1,100 
$1,100 
$1,100 
$1,210 
$1,210 
$11,031 
Property Tax 
$
500 
$
450 
$
405 
$
365 
$
550 
$
495 
$
445 
$
401 
$
605 
$
545 
$
4,760 
Maint/Repairs 
$
360 
$
371 
$
382 
$
393 
$
405 
$
417 
$
430 
$
443 
$
456 
$
470 
$
4,127 
Gasoline 
$1,800 
$1,854 
$1,910 
$1,967 
$1,739 
$1,791 
$1,845 
$1,900 
$1,583 
$1,631 
$18,019 












Total 
$7,794 
$7,611 
$7,633 
$7,661 
$8,376 
$8,167 
$8,183 
$8,206 
$8,934 
$8,756 
$80,969 
NPV @ 8% 
$7,216 
6,525 
$6,059 
$5,631 
$5,701 
$5,147 
$4,775 
$4,433 
$4,469 
$4,056 
$53,826 




















Total Difference 
$15,200 








NPV Difference 
$ 5,944 








Monthly Difference 
$ 127 








Monthly NPV Difference 
$ 50 

