1. Initial Description Item Description a. Down payment (capital cost reduction) b. Security deposit 2. Terms of lease and loan (years) 3. Term of lease and loan (months) (item 2 x 12) 4. Monthly lease payment 5. Total payments over the term of the lease (item 3 x item 4) 6. Interest rate earned on savings (in decimal form) 7. Opportunity cost of initial payment (item 1 x item 2 x item 6) 8. Payment/refund for market value adjustment at the end of the lease (PO for closed-end leases) &/or estimated end-of-term charges 9. Total cost of leasing (item 1a + item 5 + item 7 + item 8) PURCHASE Item Description 10. Purchase price 11. Down payment 12. Sales tax rate (in decimal form) 13. Sales tax (item 10 x item 12) 14. Monthly loan payment (terms: 18,500, 48 months, 7%) 15. Total payments over the term of the loan (item 3 x item 14) 16. Opportunity cost of down payment (item 2 x item 6 x item 11) 17. Estimated value of the car at the end of the loan - 18. Total cost of purchasing (item 11 + item 13 + item 15 + item 16- item 17) 2,200.00 500.00 Amount 22,000.00 3,500.00 0.05 1,100.00 443.01 21,264.27 560.00 12,100.00 12,324.27 Amount 2,700.00 4 48 350.00 16,800.00 0.040 432.00 0.00 19,432.00

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
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Automobile Lease vs. Purchase Costs Analysis
LEASE
1. Initial Description
Item Description
a. Down payment (capital cost reduction)
b. Security deposit
2. Terms of lease and loan (years)
3. Term of lease and loan (months) (item 2 x 12)
4. Monthly lease payment
5. Total payments over the term of the lease (item 3 x item 4)
6. Interest rate earned on savings (in decimal form)
7. Opportunity cost of initial payment (item 1 x item 2 x item 6)
8. Payment/refund for market value adjustment at the end of the lease
(P0 for closed-end leases) &/or estimated end-of-term charges
9. Total cost of leasing (item 1a + item 5 + item 7 + item 8)
PURCHASE
Item Description
10. Purchase price
11. Down payment
12. Sales tax rate (in decimal form)
13. Sales tax (item 10 x item 12)
14. Monthly loan payment (terms: 18.500_, 48 months, 7%)
15. Total payments over the term of the loan (item 3 x item 14)
16. Opportunity cost of down payment (item 2 x item 6 x item 11)
17. Estimated value of the car at the end of the loan
18. Total cost of purchasing (item 11 + item 13 + item 15 + item 16-
item 17)
2,200.00
500.00
Amount
22,000.00
3,500.00
0.05
1,100.00
443.01
21,264.27
560.00
12,100.00
12,324.27
Amount
2,700.00
4
48
350.00
16,800.00
0.040
432.00
0.00
19,432.00
Transcribed Image Text:Automobile Lease vs. Purchase Costs Analysis LEASE 1. Initial Description Item Description a. Down payment (capital cost reduction) b. Security deposit 2. Terms of lease and loan (years) 3. Term of lease and loan (months) (item 2 x 12) 4. Monthly lease payment 5. Total payments over the term of the lease (item 3 x item 4) 6. Interest rate earned on savings (in decimal form) 7. Opportunity cost of initial payment (item 1 x item 2 x item 6) 8. Payment/refund for market value adjustment at the end of the lease (P0 for closed-end leases) &/or estimated end-of-term charges 9. Total cost of leasing (item 1a + item 5 + item 7 + item 8) PURCHASE Item Description 10. Purchase price 11. Down payment 12. Sales tax rate (in decimal form) 13. Sales tax (item 10 x item 12) 14. Monthly loan payment (terms: 18.500_, 48 months, 7%) 15. Total payments over the term of the loan (item 3 x item 14) 16. Opportunity cost of down payment (item 2 x item 6 x item 11) 17. Estimated value of the car at the end of the loan 18. Total cost of purchasing (item 11 + item 13 + item 15 + item 16- item 17) 2,200.00 500.00 Amount 22,000.00 3,500.00 0.05 1,100.00 443.01 21,264.27 560.00 12,100.00 12,324.27 Amount 2,700.00 4 48 350.00 16,800.00 0.040 432.00 0.00 19,432.00
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