A luxury car can be leased for $679 per month for 36 months. Terms are first mon
ID: 2726876 • Letter: A
Question
A luxury car can be leased for $679 per month for 36 months. Terms are first month's lease payment, a $625 refundable security deposit, a consumer down payment of $3500, and an acquisition fee of $725 due at lease signing. Tax, license, title fees, and insurance extra. Option to purchase at lease end for $37,775 plus a fee of $350. Mileage charge of $0.20 per mile over 30,000 miles. Determine the interest rate ( nominal and effective) for the lease. Do not use excel or other computer program to solve. Must be hand calculated.
A) use the MSRO of $64,025.
B) you could buy the car for $58,000, if you arranged other financing.
Explanation / Answer
Ans:
Calculation of leasing charges of car for 36 months:
Car can be leased = $ 679 * 36 = $24,444
A lease payment = $625 *
Consumer down payment = $3,500
Acquisition fee = $725
Purchased a lease at end = $37,775
Plus fee = $350
Milage charges $0.20 = $6,000
Total charges for car = $73,419
(-) Refundable lease payment = $625
Total lease charge for car = $72,794
The lease payment = 2.601%
Payment Schedule
Event
Lease
Payment
Interest
Principal
Balance
Lease 1
$24,444.00
$0.00
$0.00
$24,444.00
Advanced Payment 1
$625.00
$0.00
$625.00
$23,819.00
Lease Payment 1
$625.00
$51.62
$573.38
$23,245.62
Lease Payment 2
$625.00
$50.38
$574.62
$22,671.00
Lease Payment 3
$625.00
$49.14
$575.86
$22,095.14
Lease Payment 4
$625.00
$47.89
$577.11
$21,518.03
Lease Payment 5
$625.00
$46.64
$578.36
$20,939.67
Lease Payment 6
$625.00
$45.38
$579.62
$20,360.05
Lease Payment 7
$625.00
$44.13
$580.87
$19,779.18
Lease Payment 8
$625.00
$42.87
$582.13
$19,197.05
Lease Payment 9
$625.00
$41.61
$583.39
$18,613.66
Lease Payment 10
$625.00
$40.34
$584.66
$18,029.00
Lease Payment 11
$625.00
$39.08
$585.92
$17,443.08
Lease Payment 12
$625.00
$37.81
$587.19
$16,855.89
Lease Payment 13
$625.00
$36.53
$588.47
$16,267.42
Lease Payment 14
$625.00
$35.26
$589.74
$15,677.68
Lease Payment 15
$625.00
$33.98
$591.02
$15,086.66
Lease Payment 16
$625.00
$32.70
$592.30
$14,494.36
Lease Payment 17
$625.00
$31.41
$593.59
$13,900.77
Lease Payment 18
$625.00
$30.13
$594.87
$13,305.90
Lease Payment 19
$625.00
$28.84
$596.16
$12,709.74
Lease Payment 20
$625.00
$27.55
$597.45
$12,112.29
Lease Payment 21
$625.00
$26.25
$598.75
$11,513.54
Lease Payment 22
$625.00
$24.95
$600.05
$10,913.49
Lease Payment 23
$625.00
$23.65
$601.35
$10,312.14
Lease Payment 24
$625.00
$22.35
$602.65
$9,709.49
Lease Payment 25
$625.00
$21.04
$603.96
$9,105.53
Lease Payment 26
$625.00
$19.74
$605.26
$8,500.27
Lease Payment 27
$625.00
$18.42
$606.58
$7,893.69
Lease Payment 28
$625.00
$17.11
$607.89
$7,285.80
Lease Payment 29
$625.00
$15.79
$609.21
$6,676.59
Lease Payment 30
$625.00
$14.47
$610.53
$6,066.06
Lease Payment 31
$625.00
$13.15
$611.85
$5,454.21
Lease Payment 32
$625.00
$11.82
$613.18
$4,841.03
Lease Payment 33
$625.00
$10.49
$614.51
$4,226.52
Lease Payment 34
$625.00
$9.16
$615.84
$3,610.68
Lease Payment 35
$625.00
$7.83
$617.17
$2,993.51
Lease Residual 1
$3,000.00
$6.49
$2,993.51
$0.00
Grand Total
$24,444.00
$25,500.00
$1,056.00
$24,444.00
$0.00
Event
Lease
Payment
Interest
Principal
Balance
Lease 1
$24,444.00
$0.00
$0.00
$24,444.00
Advanced Payment 1
$625.00
$0.00
$625.00
$23,819.00
Lease Payment 1
$625.00
$51.62
$573.38
$23,245.62
Lease Payment 2
$625.00
$50.38
$574.62
$22,671.00
Lease Payment 3
$625.00
$49.14
$575.86
$22,095.14
Lease Payment 4
$625.00
$47.89
$577.11
$21,518.03
Lease Payment 5
$625.00
$46.64
$578.36
$20,939.67
Lease Payment 6
$625.00
$45.38
$579.62
$20,360.05
Lease Payment 7
$625.00
$44.13
$580.87
$19,779.18
Lease Payment 8
$625.00
$42.87
$582.13
$19,197.05
Lease Payment 9
$625.00
$41.61
$583.39
$18,613.66
Lease Payment 10
$625.00
$40.34
$584.66
$18,029.00
Lease Payment 11
$625.00
$39.08
$585.92
$17,443.08
Lease Payment 12
$625.00
$37.81
$587.19
$16,855.89
Lease Payment 13
$625.00
$36.53
$588.47
$16,267.42
Lease Payment 14
$625.00
$35.26
$589.74
$15,677.68
Lease Payment 15
$625.00
$33.98
$591.02
$15,086.66
Lease Payment 16
$625.00
$32.70
$592.30
$14,494.36
Lease Payment 17
$625.00
$31.41
$593.59
$13,900.77
Lease Payment 18
$625.00
$30.13
$594.87
$13,305.90
Lease Payment 19
$625.00
$28.84
$596.16
$12,709.74
Lease Payment 20
$625.00
$27.55
$597.45
$12,112.29
Lease Payment 21
$625.00
$26.25
$598.75
$11,513.54
Lease Payment 22
$625.00
$24.95
$600.05
$10,913.49
Lease Payment 23
$625.00
$23.65
$601.35
$10,312.14
Lease Payment 24
$625.00
$22.35
$602.65
$9,709.49
Lease Payment 25
$625.00
$21.04
$603.96
$9,105.53
Lease Payment 26
$625.00
$19.74
$605.26
$8,500.27
Lease Payment 27
$625.00
$18.42
$606.58
$7,893.69
Lease Payment 28
$625.00
$17.11
$607.89
$7,285.80
Lease Payment 29
$625.00
$15.79
$609.21
$6,676.59
Lease Payment 30
$625.00
$14.47
$610.53
$6,066.06
Lease Payment 31
$625.00
$13.15
$611.85
$5,454.21
Lease Payment 32
$625.00
$11.82
$613.18
$4,841.03
Lease Payment 33
$625.00
$10.49
$614.51
$4,226.52
Lease Payment 34
$625.00
$9.16
$615.84
$3,610.68
Lease Payment 35
$625.00
$7.83
$617.17
$2,993.51
Lease Residual 1
$3,000.00
$6.49
$2,993.51
$0.00
Grand Total
$24,444.00
$25,500.00
$1,056.00
$24,444.00
$0.00
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