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Leasing vs. Buying a Car Answers

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1
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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
2
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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
3

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
4

Which of the following would be a good argument to buy rather than lease?

A
“Money is really tight. I need the lowest possible monthly payment.”
B
“It is very important for my image to drive the newest cars available.”
C
“I’m only going to need it for a few years before I move back to Great Britain.”
D
“I would prefer to walk out of the deal in the end with something to show for the money I put in.”
5

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
6

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.
7

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%
8

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
9

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.
10

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
11

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.
12

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
13

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.
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

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