Question

Purchase Costs				Leasing Costs
Down payment	$	1,600		Security deposit	$	1,030
Loan payment	$	590	for 48 months	Lease payment	$	550	for 36 months
Estimated value at end of loan	$	5,000		End of lease charges	$	920
Opportunity cost interest rate:		5	percent

   

Based on the above, calculate the costs of buying and of leasing a motor vehicle. (Round your answers to the nearest whole dollar.)

  

Purchase cost	$
Leasing cost	$

Answer 1

Purchase Cost

Purchase Cost = Down Payment + Loan Payments – Estimated value at the end of loan + Opportunity cost on down payment

= $1600 + ($590 x 48 Months) - $5,000 + ($1600 x 5% x 48/12)

= 1600+28320 -5000 + 1000'

= $25920'

Leasing Cost

Leasing Cost = Total lease payments + End of lease charges + Interest on security deposits

= ($550 x 36 months) + $920+ ($1030 x 5% x 36/3)

= 19800 + 920+154.50

= $20874.50 or 20875