To make you indifferent between purchasing and leasing, what would the present value of all lease payments need to be?
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After deciding to get a new car at Ehlert Motors, your options are to purchase it with a three-year loan or to lease it for three years. The car you wish to buy costs $38,600. the dealer has a special loan financing offer: if you make a 10% down payment, you qualify for a special 0.96% APR compounded monthly (much lower than the competitive market 3.6% APR compounded monthly). If you purchase the car with the loan, you expect to be able to sell it in 3 years for $22,000. If you lease the car, it has no residual value (you must turn it in at the end of the lease). To make you indifferent between purchasing and leasing, what would the present value of all lease payments need to be? Because we weren't given lease information, I believe we just need to calculate the PV of the purchasing option.
Vehicles are an entity's long-term asset that it uses to conduct daily company operations. There are two ways you can use automobiles like cars, vans, or pickup trucks. Leasing an automobile allows one to utilize it for a predetermined amount of time while still owning it. Simply put, buying a car means paying for it up front or over time in installments. Leasing, on the other extreme, is a little different since it enables you to utilize the item for a predetermined amount of time in exchange for regular lease payments. Therefore, you must take into account certain factors related to your needs, use, duration, and other factors before making any decisions.
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- After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $99 today and $499 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 6% APR. You believe you will be able to sell the car for $23,000 in three years. All final answers are rounded to the nearest dollar. Choose all correct statements from the below. Question 6 options: If you sell the car after three years, the PV of purchasing the car is $15,780. Purchasing is always preferable if the APR is below 6%. The PV of leasing the car is $17,502. If the APR increases to 8.4%, you should lease the car. You should lease the car given that the PV of leasing is higher.You are buying a new car, and you plan to finance your purchase with a loan you will repay over 48 months. The car dealer offers two options: either dealer financing with a low APR, or a $2500 rebate on the purchase price. If you use dealer financing, you will borrow $13,000 at an APR of 3.9%. If you take the rebate, you will reduce the amount you borrow to $10,500, but you will have to go to the local bank for a loan at an APR of 8.87%. To answer the first question below, you may need the following formula, where M is your monthly payment, in dollars, if you borrow P dollars with a term of 48 months at a monthly interest rate of r (as a decimal), and r = APR/12. M = Pr(1 + r)48 (1 + r)48 − 1 Should you take the dealer financing or the rebate? dealer financingrebate How much will you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.)$After deciding to buy a new car, you can either lease the car or purchase it on a three- year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $99 today and $499 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 6 percent APR. You believe you will be able to sell the car for $23,000 in three years. What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Break-even sale price What is the present value of purchasing the car? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) $ Present value
- After deciding to get a new car, you can either lease the car or purchase it with a three-year loan. The car you wish to buy costs $39,500. The dealer has a special leasing arrangement where you pay $108 today and $508 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent, compounded monthly. You believe that you will be able to sell the car for $27,500 in three years. What is the cost today of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Cost of purchasing $ What is the cost today of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Cost of leasing S What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Break-even…After deciding to acquire a new car, you can either lease the car or purchase it with a three-year loan. The car you want costs $37,000. The dealer has a leasing arrangement where you pay $2,400 today and $580 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in three years. a. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What break-even resale price in three years would make you indifferent between buying and leasing?You are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car; no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. Assume you have chosen Loan A. How much interest do you pay in the second year of the loan? [Don't round interim calculations] Multiple Choice $7,330.92 $5,460.18 $1,142.99 $2,524.12 None of the above
- You are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car; no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. Assume you have chosen Loan A and would like to pay it off three years into the transaction. How much would you have to pay to retire the debt? [Don't round interim calculations] Multiple Choice $15,756.18 $16,244.96 $17,465.14 $23,882.16 None of the aboveYou are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car; no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. How much value do you destroy with Loan B? [Don't round interim calculations] Multiple Choice $0.00 $3,596.89 $1,337.80 $7,000.00 $2,433.11After deciding to acquire a new car, you realize you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a leasing arrangement where you pay $97 today and $497 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in two years. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of lease $ What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of purchase $ What break-even resale price in two years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2…
- You are purchasing a new car for $27,600. The dealership offers you three options: 0% financing: 0 down and 0% financing for 48 months. Rebate: 0 down. If you choose the rebate, you will need to secure a loan for the balance at your local bank. Down payment: Make a down payment of 5% or more and get financing at 1.5% compounded monthly for 48 months. The rebate offer is $1900, and you can obtain a car loan at your local bank for the balance at 2.03% compounded monthly for 48 months. If you choose the rebate, what is your monthly payment? $ _______ . Round to the nearest dollar.You are purchasing a new car for $27,600. The dealership offers you three options: 0% financing: 0 down and 0% financing for 48 months. Rebate: 0 down. If you choose the rebate, you will need to secure a loan for the balance at your local bank. Down payment: Make a down payment of 5% or more and get financing at 1.5% compounded monthly for 48 months. What is your monthly payment if you choose 0% financing for 48 months? $ . Round to the nearest dollar. The rebate offer is $4800, and you can obtain a car loan at your local bank for the balance at 5.16% compounded monthly for 48 months. If you choose the rebate, what is your monthly payment? $ . Round to the nearest dollar. You want to make monthly payments of $403, but you don't want a car loan over your head for more than 48 months, so you decide to go with the down payment option. How much of a down payment do you need to make? $ . Round to the nearest…You are purchasing a new car for $27,600. The dealership offers you three options: 0% financing: 0 down and 0% financing for 48 months. Rebate: 0 down. If you choose the rebate, you will need to secure a loan for the balance at your local bank. Down payment: Make a down payment of 5% or more and get financing at 1.5% compounded monthly for 48 months: The rebate offer is $4400, and you can obtain a car loan at your local bank for the balance at 2.27% compounded monthly for 48 months. If you choose the rebate, what is your monthly payment? $________. Round to the nearest dollar. What is your monthly payment if you choose 0% financing for 48 months? $ _________ . Round to the nearest dollar.
