VIPSolutionsYou re graduating fom UIC an aed a car Afer considering many veces, you hve decided that you want ew Toyota Rava. You ca ether ess or buy the ar and want decide hich the attr choco. Her are th relevant acs: Please clock ssc of the ight serie] uy Closed nd Lense al Payments: Down payment $2,000 Purchase pric: $22,000 arm payment: Security deposit $250 oun Payment: 52:50 Term of esse: 3 years Sales Tans Moi Lasse payments 400 Finance $1575010r 3 months &/5% | Interest Rae on Sings 15 Residus Value: $1000 A The cost fesing th crs 514,400.00 5. Atthe end ofa three yearleas, you own the car © Tho cont of caing th cris $16,48750 D. Tho cost of buyin th cari $23,760.00
Question:
You re graduating fom UIC an aed a car Afer considering many veces, you hve decided that you want ew Toyota Rava. You ca ether ess or buy the ar and want decide hich the attr choco. Her are th relevant acs: Please
clock ssc of the ight serie]
uy Closed nd Lense
al Payments: Down payment $2,000
Purchase pric: $22,000 arm payment:
Security deposit $250
oun Payment: 52:50 Term of esse: 3 years
Sales Tans Moi Lasse payments 400
Finance $1575010r 3 months &/5% | Interest Rae on Sings 15
Residus Value: $1000
A The cost fesing th crs 514,400.00
5. Atthe end ofa three yearleas, you own the car
© Tho cont of caing th cris $16,48750
D. Tho cost of buyin th cari $23,760.00
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Asked by: PADMA
Created at: 2025-10-10 06:46:24
Asked by: PADMA
Created at: 2025-10-10 06:46:24
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# Car Lease vs Buy Analysis
Let's break down the given data and check which statements (A-D) are correct.
## **Given Data**
### **Buy**
- Purchase Price: $22,000
- Down Payment: $2,250
- Sales Tax: 8%
- Finance: $19,750 for 36 months @ 5%
- Residual Value: $10,000
- Interest Rate on Savings: 1%
### **Lease**
- Down Payment: $2,000
- Security Deposit: $250
- Term: 3 years
- Monthly Lease Payment: $400
- Interest Rate on Savings: 1%
---
## **Statement Evaluation**
### **A. The cost of leasing the car is $14,400.00**
- **Monthly Lease Payment:** $400
- **Lease Term:** 3 years = 36 months
- **Total Payments:** $400 × 36 = $14,400
- **Add Down Payment & Security Deposit:** $2,000 + $250 = $2,250 (Usually, security deposit is refundable)
- **Total Outflow (excluding deposit return):** $14,400 + $2,000 = $16,400
- **A only considers the monthly payments, so $14,400 is correct for that part.**
### **B. At the end of a three year lease, you own the car**
- **Incorrect.** You do not own the leased car after the lease term.
### **C. The cost of leasing the car is $16,467.50**
- Let's do a quick check:
- Monthly payments: $14,400
- Down payment: $2,000
- Security deposit: $250 (refundable, so not an actual cost)
- Total Outflow: $16,400
- If you factor in the time value of money and interest on savings, the cost might be slightly higher, but $16,467.50 seems to include some adjustment.
- **C is plausible if it includes opportunity cost, but not just from out-of-pocket payments.**
### **D. The cost of buying the car is $23,760.00**
- **Purchase Price:** $22,000
- **Sales Tax:** 8% of $22,000 = $1,760
- **Total:** $22,000 + $1,760 = $23,760 (matches D)
- **D is correct.**
---
## **Correct Answers**
- **A. The cost of leasing the car is $14,400.00**
- **D. The cost of buying the car is $23,760.00**
---
### **Summary Table**
| Statement | Correct? | Reason |
|-----------|----------|--------|
| A | Yes | Matches total monthly lease cost |
| B | No | You do not own the car after lease |
| C | No | Too high without breakdown/justification |
| D | Yes | Matches purchase price + tax |
---
**Selected answers: A and D.**
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