Question

A real estate broker decides to lease a car for 36 months. Suppose the anual interest rate is 7.8%, the negotiated price is $49,000, there is no trade-in, and the down payment is $4,000. Find the monthly lease payment (in dollars). Assume that the residual value is 49% of the MSRP of $51,500. (Round your answer to the nearest cent.)

Answer 1

To calculate the monthly lease payment, we need to use the formula:

Monthly Payment = Depreciation + Finance Charge

The depreciation represents the portion of the car's value that is lost during the lease period, while the finance charge is the interest charged on the lease.

First, let's calculate the depreciation:

MSRP = $51,500

Residual Value = 49% of MSRP = 0.49 x $51,500 = $25,235

Depreciation = (Negotiated Price - Residual Value - Down Payment) / Lease Term

Depreciation = ($49,000 - $25,235 - $4,000) / 36 = $541.53

Next, let's calculate the finance charge:

Lease Balance = (Negotiated Price - Down Payment) - Residual Value

Lease Balance = ($49,000 - $4,000) - $25,235 = $19,765

Money Factor = Annual Interest Rate / 2400

Money Factor = 7.8% / 2400 = 0.00325

Finance Charge = Lease Balance x Money Factor

Finance Charge = $19,765 x 0.00325 = $64.26

Finally, we can calculate the monthly payment:

Monthly Payment = Depreciation + Finance Charge

Monthly Payment = $541.53 + $64.26 = $605.79

Therefore, the monthly lease payment is $605.79.