Leasing vs. Buying a Car Answers

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.$9,201.60b.$5,633.80c.$17,750.00d.$45,642.86

Jennifer is looking to lease a car. Bob’s Auto has a car available with a money factor of 0.00344. AAA Auto has the exact same car available with a money factor of 0.00313. Which of the following statements is true?a.The lower money factor with Bob’s Auto will give Jennifer the lowest monthly payment.b.The lower money factor with AAA Auto will give Jennifer the lowest monthly payment.c.The higher money factor with Bob’s Auto will give Jennifer the lowest monthly payment.d.The higher money factor with AAA Auto will give Jennifer the lowest monthly payment.

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.$1,389b.$7,200c.$15,680d.$40,320

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.

The depreciation component of a lease payment is _____.a.to compensate the leasing company for the monetary value the car loses during your leaseb.interest you pay on the money the lease company has invested in your car during your leasec.the sum of your first and final lease payments, designed to make driving the car off the lot more affordabled.an additional amount added to the value of the car to say “thank you” to the lease company for their services

Which of the following is not a fee that contributes to the initial cost of leasing a car?a.first paymentb.final paymentc.acquisition feed.disposition fee

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%

Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9% interest rate for 36 months with a residual value of 57%. The MSRP for the car Jennifer is leasing is $17,500. What will Jennifer’s monthly lease payment be?a.$93.84b.$99.75c.$209.03d.$312.06

Leasing a car for a five-year period usually costs about the same as a five-year loan because __________.a.five-year leases are considered more risky and come with a higher interest rateb.the longer time period over which to pay the leasing company creates a higher monthly paymentc.if you lease a car for five years, the leasing company transfers it to a sale with the same monthly paymentd.even with the lower monthly payments, leasing a car for five years requires a second lease agreement, which comes with additional fees

Tim needs a new car while he attends college in the United States for the next three years. The car he would like has an MSRP of $15,000. A local dealer can get him a three-year loan with a 7% interest rate if Tim can make a $1,500 down payment. The same dealer offers the same car for lease with a money factor of 0.00271 and a residual value of 75%. The lease requires an additional fee of $1,250 to cover Tim's security deposit and the acquisition and documentation fees for the car. Tim is looking to drive the car home with the smallest monthly payment. Which of the following statements is true?a.The monthly payment for the loan is lower. b.The monthly payment for the lease is lower.c.The monthly payments for the lease and loan are the same. d.You cannot compare the monthly payments for leases and loans.