Question

Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9% interest rate for 36 months with a residual value of 57%. The MSRP for the car Jennifer is leasing is $17,500. What will Jennifer’s monthly lease payment be?
a.
$93.84
b.
$99.75
c.
$209.03
d.
$312.06

Answer 1

Answer: $312.06

Explanation:

We are given that :

MSRP = $17500 , time = 36 months , interest rate = 9% , residual value = 57%

Exact residual value = 57% of 17,500 = $9975

Also, we know Money factor = rate ÷ 2400

money factor = 0.00375

Step 1 : To calculate monthly depreciation by using the formula :

Monthly Depreciation: MSRP-RESIDUAL VALUE / No. of MONTHS

17500-9975 / 36 = $209.03

Step 2 : To calculate monthly financial charge by using the formula :-

Monthly financial charge=( MSRP + RESIDUAL VALUE) . MONEY FACTOR.

Monthly financial charge = (17500+ 9975) . 0.00375= $103.031 25

Step 3 : To calculate lease amount by using the formula :

Lease payment = Depreciation + Financial charge

Lease payment = 209.03 + 103.031 25= 312.06

So, the approximate lease payment is $312.06