1. Calculate Monthly payment of leasing car and financing the car: a) Which option would be...

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1. Calculate Monthly payment of leasing car and financing the car: a) Which option would be economically better for Henry? (2 marks) 2. Which option would be economically better if the residual value was $15,500 for the lease option? (1 mark) 3. If the residual value for the lease option is $15,500 and the finance interest rate can be changed, what finance interest rate compounded semi-annually can make leasing and financing economically equivalent? (not marked as correct/ incorrect - BUT please discuss this part in your replies to others) Description Options Leasing the car $31,500.00 Financing the car $31,500.00 List Price Down $2,000 $2,000 payment Terms in 48 48 months Monthly ? ? payments Residual $13,453.56 value *Additional purchase costs include freight & PDI, Air Conditioning tax, tire tax and registration fees are paid up in front and do not take into this consideration. **Assume that money is worth 5.5% compounded annually. The lease rate is 4.9% compounded monthly. The finance rate is $3.9% compounded monthly. *** HST is 13% and needs to be added properly. **** When calculating leasing payment, no HST is added to the residue value. But if to make residue payment to own, 13% HST will be added to the residue. 1. Calculate Monthly payment of leasing car and financing the car: a) Which option would be economically better for Henry? (2 marks) 2. Which option would be economically better if the residual value was $15,500 for the lease option? (1 mark) 3. If the residual value for the lease option is $15,500 and the finance interest rate can be changed, what finance interest rate compounded semi-annually can make leasing and financing economically equivalent? (not marked as correct/ incorrect - BUT please discuss this part in your replies to others) Description Options Leasing the car $31,500.00 Financing the car $31,500.00 List Price Down $2,000 $2,000 payment Terms in 48 48 months Monthly ? ? payments Residual $13,453.56 value *Additional purchase costs include freight & PDI, Air Conditioning tax, tire tax and registration fees are paid up in front and do not take into this consideration. **Assume that money is worth 5.5% compounded annually. The lease rate is 4.9% compounded monthly. The finance rate is $3.9% compounded monthly. *** HST is 13% and needs to be added properly. **** When calculating leasing payment, no HST is added to the residue value. But if to make residue payment to own, 13% HST will be added to the residue.

Answer rating: 100% (QA)

1 Lease vs Finance Monthly Payment Calculation Economic Benefit Unknown Yet Unfortunately we cannot definitively determine the economically better opt... View the full answer