Answers26-27 Ignite Technical Math-Financial Math - MA2007Financing a Car

Leasing vs. Buying a Car Answers

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21
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Which of the following would be a good argument to buy rather than lease?

A
“Money is really tight. I need the lowest possible monthly payment.”
B
“It is very important for my image to drive the newest cars available.”
C
“I’m only going to need it for a few years before I move back to Great Britain.”
D
“I would prefer to walk out of the deal in the end with something to show for the money I put in.”
22
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Sally is near the end of a three year lease on a car with an original MSRP of $38,000. Her leasing company claims that the car is now worth only $28,500. Which percentage represents the residual value of Sally’s leased car?

A
25%
B
33%
C
67%
D
75%
23

Which of the following is not a fee that affects the total cost of leasing a car?

A
principal charge
B
total down payment
C
residual value of the car
D
documentation and registration fees
24

Cindy would like to lease a car worth $56,000 for a three-year period. The leasing company told Cindy that after three years, the car would have a residual value of $40,320. How much of the car’s original value will Cindy have to pay off during her three-year lease?

A
$1,389
B
$7,200
C
$15,680
D
$40,320
25

If a person wanted to purchase his or her dream car, and keep it for many years, is leasing or buying the better option? Why?

A
Buying would be the better option because the overall cost would be less. After the car is paid off, the owner gets much more value from the car, having already paid it off.
B
Leasing would be the better option, so the newest model could be driven every few years.
C
It wouldn't matter, as long as the person got to drive the dream car.
D
Leasing would be the better option because it would allow the person to customize the car and drive it as much as he or she wants.
26

Which of the following statements explains the difference between a lease and a loan?

A
At the end of a loan the car belongs to you, but at the end of a lease, the car still belongs to the lease company.
B
At the end of a loan, the car still belongs to the lease company, but at the end of a lease the car belongs to you.
C
A loan requires a large down payment at the beginning while a lease does not.
D
A lease requires a large down payment at the beginning while a loan does not.
27

Sally is near the end of a three year lease on a car with an original MSRP of $38,000. Her leasing company claims that the car is now worth only $28,500. Which percentage represents the residual value of Sally’s leased car?

A
25%
B
33%
C
67%
D
75%
28

Cindy has decided to lease a car. The lease includes a money factor of 0.00354. What interest rate is Cindy being charged in her lease?

A
0.85%
B
8.5%
C
1.475%
D
14.75%
29

Henry is at the end of a three-year lease for his car. His leasing company says that his car is currently worth $12,780, a 72% residual value. Determine the original MSRP of Henry’s leased car.

A
$9,201.60
B
$5,633.80
C
$17,750.00
D
$45,642.86

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