7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Warm Up Calculate:24,500(.04) + 36(342) + 60.

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Presentation transcript:

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Warm Up Calculate:24,500(.04) + 36(342) + 60

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Vocabulary Lease – a rental agreement over a given period of time Capitalized Cost – the selling price of a leased car Residual Value – the predicted value of a car at the end of a lease period (expressed as a percent of the original sticker price) Money Factor – the interest rate / 24 Gap Insurance – additional insurance to pay the difference between what is still owed on a car lease and what insurance would normally pay

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Advantages of Leasing 1.Leasing requires less money to start than a purchase. 2.Leasing generally has fewer problems because the cars are new. Disadvantages of Leasing 1.The lessee has no trade-in when the lease is over. 2.Leases have mileage limits. If you exceed the limit, you pay a penalty per mile in excess of the limit.

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Example 1 p 264 (using the sample lease payments in Table 7.5) Initial Cost = (35,000) Initial Cost = Initial Cost = $2319

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Example 2 p 264 (using the sample lease payments in Table 7.5) Total Cost = 48(570) (25) +.04(43,070) Total Cost = 27, Total Cost = $29,232.80

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Example 3 p 264 From Table 7.6, the residual rate for a full-size car and 48 month lease is 33%. End of lease value = $45,820(0.33) End of lease value = $15,120.60

7-5 LEASING A NEW CAR OBJECTIVE: TO FIND THE COST OF LEASING A CAR Homework p 266 #1-5, 9-11