Contemporary Mathematics for Business and Consumers 7th Edition by Robert Brechner ,George Bergeman

Exercise 8

Use the advertisement below and the Purchase vs. Lease Worksheet on page 450 to compare the total cost of each option. The residual value of the car is estimated to be $13,650. The lease has no termination fees or charges. If you decide to purchase, your bank requires a down payment of $3,800 and will finance the balance with a 10.25% APR loan for 36 months. The sales tax in your state is 6.5%, and the tag and title charges are $75. The opportunity cost is the interest your down payment could have earned if you didn't purchase the vehicle. Currently, your money earns 4.5% in a savings account.
a. What is the total purchase price of the vehicle, including tax, tag, and title?
b. What are the monthly payments on the loan?
c. What is the total cost of purchasing?
d. What is the total cost of leasing?
e. In your own words, explain which of these financing choices is a better deal and why.
f. Choose an ad from your local newspaper for a lease offer on a vehicle you would like to have. Gather the necessary information needed to complete a Purchase vs. Lease Worksheet. Use local dealers and banks to find the information you need or do some research on the Internet. Report your findings and conclusions to the class.