Question

You are deciding whether to buy a car for ​$21,000 or to accept a lease agreement. The lease entails a ​$800 fee plus monthly payments of ​$250 for 48 months. Under the lease​ agreement, you are responsible for service on the car and insurance. At the end of the​ lease, you may purchase the car for ​$9000. Complete parts a through c below.

a. Should the cost of service and insurance determine which option you​ choose?

A. Yes, because you probably​ don't have to pay for services when you buy the car.

B. ​No, because it is cheaper to lease the car than to buy it.

C. ​No, because you will probably have to pay for service and insurance with either plan.

D. Yes, because you get a discount on your insurance when you lease the car.

b. Does the total cost of purchasing the car at the end of the lease agreement exceed the cost of purchasing the car at the​ outset?

A.​Yes, the total cost of the car at the end of the lease is ​$___ (fill in the blank)

B.​ No, the total cost of the car at the end of the lease is $___(fill in the blank)

c. What are some possible advantages of leasing the​ car?

A. You can sell the car whenever you want and you can make money on the car when you sell it.

B. The insurance costs less and you get a service discount.

C. You can give the car back whenever you want and you can get a new car whenever you want.

D. Not all of the money is needed up front and you have years to decide if you want to buy the car.

Answer 1

a. Should the cost of service and insurance determine which option you​ choose?

C. ​No, because you will probably have to pay for service and insurance with either plan.

Since it is the responsibility of the owner to pay for service and insurance

Hence, same under both the options

b. Does the total cost of purchasing the car at the end of the lease agreement exceed the cost of purchasing the car at the​ outset?

A.​Yes, the total cost of the car at the end of the lease is 800 +250*48 + 9000

= $21,800

c. What are some possible advantages of leasing the​ car?

D. Not all of the money is needed up front and you have years to decide if you want to buy the car.

Also, C. You can give the car back whenever you want and you can get a new car whenever you want.