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

Leasing vs. Buying a Car Answers

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1
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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.
2
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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.
3

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
4

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 rate
B
the longer time period over which to pay the leasing company creates a higher monthly payment
C
if you lease a car for five years, the leasing company transfers it to a sale with the same monthly payment
D
even with the lower monthly payments, leasing a car for five years requires a second lease agreement, which comes with additional fees
5

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
6

Calculate the monthly lease payment for a 36-month lease on a car with a $29,000 MSRP, a 79% residual value, and a money factor of 0.00365.

A
$358.64
B
$128.08
C
$169.17
D
$105.85
7

Determine the money factor for a lease with an interest rate of 9%.

A
0.00375
B
0.03750
C
2.16000
D
21.60000
8

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.
9

Which of the following is not a fee that contributes to the initial cost of leasing a car?

A
first payment
B
final payment
C
acquisition fee
D
disposition fee
10

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.
11

The depreciation component of a lease payment is _____.

A
to compensate the leasing company for the monetary value the car loses during your lease
B
interest you pay on the money the lease company has invested in your car during your lease
C
the sum of your first and final lease payments, designed to make driving the car off the lot more affordable
D
an additional amount added to the value of the car to say “thank you” to the lease company for their services
12

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.
13

Determine the money factor for a lease with an interest rate of 9%.

A
0.00375
B
0.03750
C
2.16000
D
21.60000
14

Which of the following is not a fee that contributes to the initial cost of leasing a car?

A
first payment
B
final payment
C
acquisition fee
D
disposition fee
15

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%
16

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
17

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
$93.84
B
$99.75
C
$209.03
D
$312.06
18

Calculate the monthly lease payment for a 36-month lease on a car with a $29,000 MSRP, a 79% residual value, and a money factor of 0.00365.

A
$358.64
B
$128.08
C
$169.17
D
$105.85
19

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 rate
B
the longer time period over which to pay the leasing company creates a higher monthly payment
C
if you lease a car for five years, the leasing company transfers it to a sale with the same monthly payment
D
even with the lower monthly payments, leasing a car for five years requires a second lease agreement, which comes with additional fees
20

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.

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