Question 3 • 2025-2026 GSP Mathematical Reasoning for Decision Making
Tim needs a new car while he attends college in the United States for the next three years. The car he would like has a MSRP of $15,000. A local dealer can get him a 3-year loan with a 7% interest rate if Tim can give them a $1,500 down payment. The same dealer offers the same car to 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 initial out-of-pocket cost. Which of the following statements is true?
Answer
A
The initial out-of-pocket cost is less for the lease.
B
The initial out-of-pocket cost is less for the loan.
C
The initial out-of-pocket cost is the same for the lease and loan.
D
The initial out-of-pocket cost for a lease is not comparable to that of a loan.
Explanation
For the loan, Tim must pay the required $1,500 down payment to drive the car home. The lease requires $1,250 in fees and deposits, so its initial out-of-pocket cost is $250 less than the loan’s. Therefore, the true statement is that the initial out-of-pocket cost is less for the lease.
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