Question

Two years ago you signed a​ 4-year lease on a car. The sticker price on the car was ​$20,000, you made no down​ payment, the lease rate was 5%, and the monthly payments (starting at the time of​ signing) were $249.42. The buyout was $11,140 due at the end of the lease term. Now​ (two years after signing the lease but just before the 25th lease​ payment) a new car has been released with better styling and​ 20% more horsepower. You want to get out of your lease on the old car and lease one of the new ones. The car dealer is happy to take your old car from you and cancel the lease if you have positive equity in the car. Equity is defined as the market value of the car (today) minus the principal outstanding. The market value of your old car is $15,380. What is the value of your equity in the car?

Answer 1

Equity Value = Market value - Principal O/s

Equity Value = $15380 - 15767.24

Equity Value = -$387.24

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