Question

Use the following data: Down payment (to finance vehicle) $ 7,000 Down payment for lease $...

Use the following data:

Down payment (to finance vehicle) $ 7,000 Down payment for lease $ 2,700
Monthly loan payment $ 980 Monthly lease payment $ 740
Length of loan 48 months Length of lease 48 months
Value of vehicle at end of loan $ 13,200 End-of-lease charges $ 1,350

a. What is the total cash outflow for buying and for leasing a motor vehicle with a cash price of $41,000

b. Based on your answers in part a, would you recommend buying or leasing?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution: a

i) Calculation of Cash Outflow under Loan :

ii) Calculation of Cash Outflow under Lease :

Solution b:

Net Total Outflow under lease option is better than loan option as it is lower as compared to loan option.

NOTE:

Impact Depreciation, Savings on Taxation, and Discounting i.e., impact of Time Value of Money is not taken into consideration in the absence of information.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Purchase Costs Leasing Costs Down payment $ 2,150 Security deposit $ 840 Loan payment $ 530...
Purchase Costs Leasing Costs Down payment $ 2,150 Security deposit $ 840 Loan payment $ 530 for 36 months Lease payment $ 450 for 36 months Estimated value at end of loan $ 4,500 End of lease charges $ 1,160 Opportunity cost interest rate 4 percent Based on the above, calculate the costs of buying and of leasing a motor vehicle
You have saved $3,000 for a down payment on a new car. The largest monthly payment...
You have saved $3,000 for a down payment on a new car. The largest monthly payment you can afford is $300. The loan will have a 9% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? For 60 months? Do not round intermediate calculations. Round your answers to the nearest cent. Financed for 48 months: $   Financed for 60 months: $  
You have saved $5,000 for a down payment on a new car. The largest monthly payment...
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $350. The loan will have a 9% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? For 60 months? Do not round intermediate calculations. Round your answers to the nearest cent. Financed for 48 months: $ ___ Financed for 60 months: $ ___
You have saved $5,000 for a down payment on a new car. The largest monthly payment...
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $500. The loan will have a 15% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? For 60 months? Do not round intermediate calculations. Round your answers to the nearest cent. Financed for 48 months: $ Financed for 60 months: $
You have saved $5,000 for a down payment on a new car. The largest monthly payment...
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $400. The loan will have a 15% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? For 60 months? Do not round intermediate calculations. Round your answers to the nearest cent.
a) To purchase a new vehicle, $3000 is paid as a down payment, followed by bi-weekly...
a) To purchase a new vehicle, $3000 is paid as a down payment, followed by bi-weekly payments of $175 for four years. If interest on the loan is 0.20% p.a. compounded bi-weekly, what is the cash value of the vehicle? b) To purchase a $25 000 vehicle, a loan was taken out with the bank at 3.51% compounded quarterly. Payments will be made at the end of each quarter for the next 3 years. Calculate the size of the payment...
The following article does a good job of breaking down the advantages/disadvantages of leasing vs. purchasing...
The following article does a good job of breaking down the advantages/disadvantages of leasing vs. purchasing vehicles: Title: Pros and Cons of Leasing vs. Buying a Vehicle Source: http://www.investopedia.com/articles/pf/05/042105.asp Buying a car can be overwhelming. In fact, the pleasure of getting a new car can be quickly clouded during the financing decision-making process and price negotiations. Besides price haggling, many car shoppers are plagued with the decision to leaseor buy. Which financing decision is right and why? This article will...
You have saved $5,000 for a down payment on a new car. The largest monthly payment...
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan will have a 9% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? Do not round intermediate calculations. Round your answer to the nearest cent. $   What is the most expensive car you can afford if you finance it for 60 months? Do not round...
You have saved $3,000 for a down payment on a new car. The largest monthly payment...
You have saved $3,000 for a down payment on a new car. The largest monthly payment you can afford is $350. The loan will have an 8% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? Do not round intermediate calculations. Round your answer to the nearest cent. What is the most expensive car you can afford if you finance it for 60 months? Do not round intermediate...
You have saved $3,000 for a down payment on a new car. The largest monthly payment...
You have saved $3,000 for a down payment on a new car. The largest monthly payment you can afford is $300. The loan will have a 10% APR based on end-of-month payments. A.What is the most expensive car you can afford if you finance it for 48 months? Do not round intermediate calculations. Round your answer to the nearest cent. B. What is the most expensive car you can afford if you finance it for 60 months? Do not round...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT