Question

Ralph is leasing a $32,000 car for 36 months. The terms of his lease include an 8. 5% interest rate (money factor of 0. 00354) and a residual value of 72%. Determine Ralph’s approximate monthly lease payment. A. $145. 00 b. $230. 40 c. $248. 89 d. $443. 73.

Answer 1

The correct statement will be that the monthly lease payments that Ralph will have to make to lease such a car will be $362.17. So, the correct option that matches the statement is not quoted above.

The calculation of monthly lease payment can be done by deduction of residual value and dividing such value by number of months.

Calculation of monthly lease payments

• The residual value can be calculated by using the formula by applying the given information,

• $\rm Residual\ Value= Original\ Value\ x\ \% of Residual\ Value\\\\\rm Residual\ Value=32000\ x\ 72\%\\\\\rm Residual\ Value=\ 23040$

• So, depreciation of the car after three years will be $8960.

• Interest payment per month will be calculated as,

• $\rm Monthly\ Interest= Car\ Value\ x\ Money\ factor\\\\\rm Monthly\ Interest=32000\ x\ 0.00354\\\\\rm Monthly\ Interest=113.28$

• And the payment towards actual lease would be,

• $\rm Actual\ Payment= \dfrac{Depreciation}{no.\ of\ Months}\\\\\rm Actual\ Payment= \dfrac{8960}{36}\\\\\rm Actual\ Payment= \ 248.89$

• So, total monthly payment towards leasing such car will be,

• $\rm Total\ Payment= Actual\ Payment+ Interest\ Payment\\\\\rm Total\ Payment=248.89+113.28\\\\\rm Total\ Payment=\ 362.17$

Hence, the correct statement is that the monthly payment towards the lease of car by Ralph will be $362.17 and none of the options given is correct.

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