PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 5, Problem 2FPE
LEASE 
ERSUS PURCHASE CAR DECISION. USE WOR
SHEET 5.1. Everett Adams is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $450 over the 36-month term of the closed-end lease. On the other hand, if he buys the car, then he’ll have to make a $2,400 down payment and will finance the balance with a 36-month loan requiring monthly payments of $515; he’ll also have to pay a 6 percent sales tax ($1,080) on the purchase price, and he expects the car to have a residual value of $6,500 at the end of three years. Use the automobile lease versus purchase analysis form in Worksheet 5.1 to find the total cost of both the lease and the purchase, and then recommend the best strategy for Everett.
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You are considering either leasing or purchasing a car. You notice an ad that says you
can lease the car you want for $229.00 per month. The lease term is 48 months with
the first payment due at inception of the lease. You must also make an additional
down payment of $1,120. The ad also says that the residual value of the vehicle is
$12,760. The list price of the vehicle is $20,274, but after much research, you have
concluded that you could buy the car for a total "drive-out" price of $18,600. What is
the quoted annual interest rate you are actually paying with the lease?
10.23%
10.38%
7.21%
7.11%
8.22%
When would leasing a vehicle be a better option than buying?
Describe in at least five sentences how you will prepare to purchase your next vehicle in order to (1) get the appropriate vehicle, (2) to get the best deal, and (3) to avoid getting ripped off.
For the Questions 3-5 assume you want to finance (borrow) $12,000 for your next car and your interest rate will be 6%.
What will be your monthly payment and the total amount paid over the life of the loan if you finance for 48 months? Provide the car payment and the TVM inputs you used to calculate the payment.
Payment
Total of all payments
PV
FV
RATE/INTEREST
PERIODS/N
(See next page for Questions 4 and 5)
What will be your monthly payment and the total amount paid over the life of the loan if you finance for 60 months? Provide the car payment and the TVM inputs you used to calculate the payment.
Payment
Total of all payments
PV
FV…
You are considering leasing a car. You notice an ad that says you can lease the car you want for R477.00 per month. The lease term is 60 months with the first payment due at inception of the lease. You must also make an additional down payment of R2,370. The ad also says that the residual value of the vehicle is R20,430. After much research, you have concluded that you could buy the car for a total "driveout" price of R33,800. What is the quoted annual interest rate you will pay with the lease?
Chapter 5 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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