Sharese is tired of riding the bus. She has been saving since she began working at The 7th Inning and she thinks that she has saved up enough to buy a car. After doing her homework and investigating the possibilities, she has settled on a cute red Honda Civic. She does not have a lot of money to put down on the car and she wants her payments to be as low as possible. When she talks with the salesman about financing, she discovers that she has several financing options to consider.
Buy vs. Lease comparison table.
To purchuse:
Actual Purchase Price = MSRP less any discounts.* $14,900
Down Payment 5% $745
Sales Tax Rate 7%
Amount Financed =
Purchase Price + Sales Tax – Down Payment $15,198
Loan Term (months) 48 months
APR 6.15%
Monthly Loan Payment $357.97
Total of all monthly payments + down payment $17,927.56
Residual Value ÷ Equity Value at conclusion of loan $6,495.00 for buyer
Total monthly payments + down payment – residual value $11,432.56
Taxes and License Fees $500
To lease
Capitalized Cost: (cost of the car) $14,900
Cap Reduction 5% (similar to down payment) $745
Sales tax paid only on lease payments 7%
Amount Leased =
Purchase Price – Cap Reduction – Residual Value (dealer determined) $7,660
Lease Term (months) 48 months
Interest Rate 6.15%
Monthly Lease Payment including 7% tax and cost of money factor** $227.50
Total of all monthly payments + cap reduction payment $11,665
Residual Value at conclusion of lease $0 for lessee
$6495.00 for dealer
Total payments plus cap reduction payment minus equity $11,665
Taxes and License Fees $500
1.At the time of signing, roughly how much will Sharese have to pay if she wants to purchase the car with the minimum required down payment? How much will she have to pay if she wants to lease the car? Can she afford the down payment for either option?