Personal Finance 1st Edition by Jack R. Kapoor

Exercise 28

Buying vs. Leasing a Motor Vehicle. Based on the following, calculate the costs of buying and of leasing a motor vehicle. (Obj. 2)

Purchase Costs		Leasing Costs
Down payment	$1,500	Security deposit	$500
Loan payment	$450 for 48 months	Lease payment	$450 for 36 months
Estimated value at end of loan	$4,000	End of lease charges	$600
Opportunity cost interest rate:	4%

Step 1 of 2

Calculate the purchasing cost:

Cost of purchasing a vehicle is calculated as:

Given:

Purchase cost
Down payment
Loan payment
cost
Estimated value at End of loan

Substitute:

Therefore, the purchasing cost is $19,340