Car Purchases and Leases

# Car Purchases and Leases

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## Car Purchases and Leases

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1. Financing Car Purchases • Formulas: • Total # of monthly payments x Amount paid per month = Total amount of monthly payments • Total amount of monthly payments + Down Payment = Total Paid • Total Paid – Delivered Price = Finance Charge

2. Financing Car Purchases (Example) The delivered price of Josh’s car is \$23,560. He makes a \$2,000 down payment. He pays 48 monthly payments of \$560. What is the amount Josh paid for his car? What was the finance charge?

3. Financing Car Purchases (Example) • What is the amount Josh paid for his car? 48 x \$560 = \$26,880 \$26,880 + \$2,000 = \$28,880 (total paid)

4. Financing Car Purchases (Example) • What was the finance charge? \$28,880 - \$23,560 = \$5,320

5. Financing Car Purchases (A) • Steve bought a used truck for \$9,650. He paid a \$2,650 down payment. He also paid 36 monthly payments of \$234.30. What is the amount Josh paid for his car? • 36 x \$234.30 = \$8,434.80 • \$8,434.80 + \$2,650 = \$11,084.80

6. Financing Car Purchases (B) • Brit bought a new car for \$47,851. He paid a \$4,500 down payment. He also paid 60 monthly payments of \$805.47. What is the finance charge on the car? • 60 x \$805.47 = \$48,328.20 • \$48,328.20 + \$4,500 = \$52,828.20 • \$52,828.20-\$47,851 = \$4,977.20

7. Cost of Leasing • Lease Contract • Lease Price • Residual Value • Interest Rate • Lease Term • Security Deposit • Loan Fee • Registration Fees • Mileage Allowed

8. Cost of Leasing (Example) James leased a car at \$307/ month for 48 months and a down payment of \$995. At the end of the lease he had to pay \$0.22 for the 2,800 miles over the limit. What were his total lease costs?

9. Cost of Leasing (Solution) • 48 x \$307 = \$14,736 (total lease payments) • \$0.22 X 2,800 = \$616 (excess miles charge) • \$14,736 + \$616 + \$995 = \$16,347 (total lease costs)

10. Cost of Leasing (C) Candy has a 2-year car lease with \$528 monthly payments. Mileage limit was 12,000 miles per year. She is charged 20 cents for every mile over the limit. Her total miles for the 2 years was 30,850 miles. What was the total cost of the lease over the 2-years?

11. Cost of Leasing (C) • \$528 x 12 x 2 = \$12,672 lease payments • 30,850 – (12,000 x 2) = 6,850 excess miles • 6,850 x \$0.20 = \$1,370 excess mile charge • \$12,672 + \$1,370 = \$14,042 total costs

12. Cost of Leasing (D) Terry has a 4-year car lease with \$332 monthly payments. Mileage limit was 12,000 miles per year. He bought 3,000 extra miles each year for 7 cents per mile. Lease processing fees and down payment totaled \$418. What was the total cost of the lease over the 4-years?

13. Cost of Leasing (D) • \$332 x 12 x 4 = \$15,936 lease payments • 4 x 3,000 = 12,000 miles purchased • 12,000 x \$0.07 = \$840 extra miles • \$15,936 + \$840 + 418 = \$17,194 total costs

14. Comparing Leasing and Buying (Example) • Will and his dealer negotiated a price of \$27,400 for a new car. Will can lease this car for \$496 a month for 36 months. Option to buy it at the end of the lease for the residual value of \$16,200. If he buys the car now his monthly payment is \$822 for 3 years after paying a \$2,000 down payment. What is the total cost of purchasing the car either way? Which plan costs less?

15. Comparing Leasing and Buying (Solution) • Lease: • 36 x \$496 = \$17,856 (Total lease payments) • \$17,856 + \$16,200 = \$34,056 (Total cost to purchase leased car) • Buy: • 36 x \$822 = \$29,592 (Total monthly payments) • \$29,592 + \$2,000 = \$31,592 ( Total cost to purchase car out right) • Buying is cheaper! • \$34,056 – 31,592 = \$2,494 (Difference)

16. Comparing Leasing and Buying (E) Car costs \$18,500. Can be leased for \$436/ month with \$500 down payment and residual value of \$11,000. To purchase the car the monthly payment would be \$728 with a \$3,100 down payment. The terms are 24 months. Which is less expensive, leasing or buying and by how much?

17. Comparing Leasing and Buying (E) • Lease: • 24x \$436 = \$10,464 (Total lease payments) • \$10,464 + \$500 +\$11,000 = \$21,964 (Total cost to purchase leased car) • Buy: • 24 x \$728 = \$17,472 (Total monthly payments) • \$17,472 + \$3,100 = \$20,572 ( Total cost to purchase car out right) • Buying is cheaper! • \$21,964 – 20,572= \$1,392 (Difference)

18. Comparing Leasing and Buying (F) Car costs \$37,960. Can be leased for \$623/ month with \$995 down payment and residual value of \$19,050. To purchase the car the monthly payment would be \$873 with a \$3,800 down payment. The terms are 4 years. Which is less expensive, leasing or buying and by how much?

19. Comparing Leasing and Buying (F) • Lease: • 4 x 12 x \$623 = \$29,904 (Total lease payments) • \$29,904+ \$995+\$19,050 = \$49,949 (Total cost to purchase leased car) • Buy: • 4 x 12 x \$873 = \$41,904 (Total monthly payments) • \$41,904 + \$3,800 = \$45,704 ( Total cost to purchase car out right) • Buying is cheaper! • \$49,949– 45,704= \$4,245 (Difference)

20. Costs of Operating Cars • Annual expenses for using the car… • Insurance • Gas • Oil • License and Inspection Fees • Tires • Repairs • Garage rent • General Upkeep

21. Costs of Operating Cars (Example) Gerri paid \$18,700 for her car. Insurance, gas, oil, and other expenses are \$2,300. The car depreciates 16% per year. She could earn \$145 interest on her investment. What was her operating costs on her car for the year?

22. Costs of Operating Cars (Solution) • Annual Deprecitaion • 16% x \$18,700 = \$2,992 • Annual Cost of Car Operation • \$2,992 + \$2,300 + \$145 = \$5,437

23. Costs of Operating Cars (G) Conrad purchased a used car \$12,480. His expenses were: gas and oil \$1,070; repairs \$512; Insurance \$981; license plates \$83; Loss of interest on investment \$561; Depreciation 12%. Find the total operating expense in year one. (Round to nearest \$)

24. Costs of Operating Cars (G) Find the total operating expense in year one. (Round to nearest \$) 12% x \$12,480 = \$1,497.60 \$1,497.60 + \$1070 + \$512 + \$981 + \$83 + \$561 = \$4,704.60 -- \$4,705

25. Costs of Operating Cars (H) Jess bought an old car for \$600. The expenses she paid this year include: gas \$610; Maintenance and repairs \$780; Property damage and liability insurance \$630; License plates \$63; Depreciation 10%; Lost interest \$15. What is the annual cost of this car?

26. Costs of Operating Cars (H) What is the annual cost of this car? 10% x \$600 = \$60 \$610 + \$780 + \$630 + \$63 + \$60 + \$15 = \$2,158