Leasing vs. Buying a Car
Calculate the monthly lease payment for a 36-month lease on a car with a $29,000 MSRP, a 79% residual value, and a money factor of 0.00365. a. $358.64 b. $128.08 c. $169.17 d. $105.85
a. $358.64
Tim needs a new car while he attends college in the United States for the next three years. The car he would like has a MSRP of $15,000. A local dealer can get him a 3-year loan with a 7% interest rate if Tim can give them a $1,500 down payment. The same dealer offers the same car to lease with a money factor of 0.00271 and a residual value of 75%. The lease requires an additional fee of $1,250 to cover Tim's security deposit and the acquisition and documentation fees for the car. Tim is looking to drive the car home with the smallest initial out-of-pocket cost. Which of the following statements is true? a. The initial out-of-pocket cost is less for the lease. b. The initial out-of-pocket cost is less for the loan. c. The initial out-of-pocket cost is the same for the lease and loan. d. The initial out-of-pocket cost for a lease is not comparable to that of a loan.
a. The initial out-of-pocket cost is less for the lease.
The depreciation component of a lease payment is _____. a. to compensate the leasing company for the monetary value the car loses during your lease b. interest you pay on the money the lease company has invested in your car during your lease c. the sum of your first and final lease payments, designed to make driving the car off the lot more affordable d. an additional amount added to the value of the car to say "thank you" to the lease company for their services
a. to compensate the leasing company for the monetary value the car loses during your lease
Which of the following would be a good argument to lease rather than buy? a. "I drive almost twice as much as the average driver." b. "I prefer the warranty that covers repair costs of a new car." c. "I'm going to need the car for at least ten years, if it lasts that long." d. "I am more interested in investing in a car rather than renting one for a long period of time."
b. "I prefer the warranty that covers repair costs of a new car."
Cindy has decided to lease a car. The lease includes a money factor of 0.00354. What interest rate is Cindy being charged in her lease? a. 0.85% b. 8.5% c. 1.475% d. 14.75%
b. 8.5%
Jennifer is looking to lease a car. Bob's Auto has a car available with a money factor of 0.00344. AAA Auto has the exact same car available with a money factor of 0.00313. Which of the following statements is true? a. The lower money factor with Bob's Auto will give Jennifer the lowest monthly payment. b. The lower money factor with AAA Auto will give Jennifer the lowest monthly payment. c. The higher money factor with Bob's Auto will give Jennifer the lowest monthly payment. d. The higher money factor with AAA Auto will give Jennifer the lowest monthly payment.
b. The lower money factor with AAA Auto will give Jennifer the lowest monthly payment.
Tim needs a new car while he attends college in the United States for the next three years. The car he would like has an MSRP of $15,000. A local dealer can get him a three-year loan with a 7% interest rate if Tim can make a $1,500 down payment. The same dealer offers the same car for lease with a money factor of 0.00271 and a residual value of 75%. The lease requires an additional fee of $1,250 to cover Tim's security deposit and the acquisition and documentation fees for the car. Tim is looking to drive the car home with the smallest monthly payment. Which of the following statements is true? a. The monthly payment for the loan is lower. b. The monthly payment for the lease is lower. c. The monthly payments for the lease and loan are the same. d. You cannot compare the monthly payments for leases and loans.
b. The monthly payment for the lease is lower.
Which of the following is not a fee that contributes to the initial cost of leasing a car? a. first payment b. final payment c. acquisition fee d. disposition fee
b. final payment
Cindy would like to lease a car worth $56,000 for a three-year period. The leasing company told Cindy that after three years, the car would have a residual value of $40,320. How much of the car's original value will Cindy have to pay off during her three-year lease? a. $1,389 b. $7,200 c. $15,680 d. $40,320
c. $15,680
Bob is thinking about leasing a car with a MSRP of $24,000 for three years. After three years, the leasing company expects the car to have a value of 72% of its original MSRP. What will the residual value of the car be after three years? a. $3,000 b. $6,000 c. $17,280 d. $33,333
c. $17,280
Henry is at the end of a three-year lease for his car. His leasing company says that his car is currently worth $12,780, a 72% residual value. Determine the original MSRP of Henry's leased car. a. $9,201.60 b. $5,633.80 c. $17,750.00 d. $45,642.86
c. $17,750.00
Bob is thinking about leasing a car. The lease comes with an interest rate of 8%. Determine the money factor that will be used to calculate Bob's payment. a. 0.00033 b. 0.00192 c. 0.00333 d. 0.01920
c. 0.00333
Ralph is leasing a car worth $24,000 for three years. His leasing company says that the car Ralph is leasing will only be worth $16,000 at the end of his lease. Approximately what percentage of the car's original value will Ralph need to pay as part of his lease? a. 8% b. 16% c. 33% d. 67%
c. 33%
Approximate the interest rate for a lease that comes with a money factor of 0.0027. a. 0.65% b. 1.13% c. 6.5% d. 11.25%
c. 6.5%
One difference between obtaining a car with a lease or a loan is that _____. a. a loan will not have any additional fees or payments that need to be considered while a lease comes with a handful of additional charges b. a lease will not have any additional fees or payments that need to be considered while a loan comes with a handful of additional charges c. a loan finances the total purchase price of the car while a lease finances only the depreciated value and related fees d. a loan finances the depreciated value of the car with related fees while a lease finances the total purchase price of the car
c. a loan finances the total purchase price of the car while a lease finances only the depreciated value and related fees
Which of the following would be a good argument to buy rather than lease? a. "Money is really tight. I need the lowest possible monthly payment." b. "It is very important for my image to drive the newest cars available." c. "I'm only going to need it for a few years before I move back to Great Britain." d. "I would prefer to walk out of the deal in the end with something to show for the money I put in."
d. "I would prefer to walk out of the deal in the end with something to show for the money I put in."
Determine the monthly payment for a 36 month lease on a $26,000 car with a residual of 71% and an interest rate of 7.5%. a. $104.87 b. $209.44 c. $273.08 d. $348.38
d. $348.38
Ralph is leasing a $32,000 car for 36 months. The terms of his lease include an 8.5% interest rate (money factor of 0.00354) and a residual value of 72%. Determine Ralph's approximate monthly lease payment. a. $145.00 b. $230.40 c. $248.89 d. $443.73
d. $443.73
Sally is near the end of a three year lease on a car with an original MSRP of $38,000. Her leasing company claims that the car is now worth only $28,500. Which percentage represents the residual value of Sally's leased car? a. 25% b. 33% c. 67% d. 75%
d. 75%
Leasing a car for a short time is usually cheaper than buying the same car since __________. a. insurance premiums are lower for leased cars b. leasing generally comes with a lower interest rate c. people who lease cars are considered more responsible than those who buy d. in leasing a car you pay only for the depreciation of the car rather than the total value
d. in leasing a car you pay only for the depreciation of the car rather than the total value
