Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 81

Visit or call a local auto dealership and inquire about leasing a car. Ask about the down payment and the required monthly payments. You will likely find the salesperson does not discuss the cost to purchase this car but focuses on the affordability of the monthly payments. This chapter gives you the tools to compute the cost of this car using the lease payment schedule in present dollars and to estimate the profit from leasing for an auto dealership.
Required
1. Compare the cost of leasing the car to buying it in present dollars using the information from the dealership you contact. (Assume you will make a final payment at the end of the lease and then own the car.)
2. Is it more costly to lease or buy the car Support your answer with computations.