Question

What is the total cost of leasing a vehicle for three years that requires a security deposit of

$300 (would earn 3% interest in a money market account otherwise), has monthly lease
payments of $385, and has a mileage restriction of 10,000 with excess mileage resulting in a 10 cents per mile charge. Assume that over the life of the lease you exceed this limitation by 8,000
miles.
A) $14,160
B) $13,860
C) $14,687
D) $14,660

Answer 1

The total cost of leasing a vehicle for three years, including the security deposit, lease payments, and excess mileage charge, is $14,160.

Step-by-step explanation:

To calculate the total cost of leasing the vehicle for three years, we need to consider the security deposit, monthly lease payments, and any excess mileage charges.

The security deposit is $300, which is not earning any interest in a money market account. The monthly lease payments are $385 for a total of 36 months (3 years), resulting in $13,860 ($385 * 36).

Since the lease has a mileage restriction of 10,000 miles per year and it was exceeded by 8,000 miles over three years, there is a charge of 10 cents per excess mile. The excess mileage charge is therefore $800 (8,000 miles * $0.10).

The total cost of leasing the vehicle for three years is the sum of the security deposit, lease payments, and excess mileage charge, which amounts to $14,160 ($300 + $13,860 + $800).