Question

Using the attached exhibit and the information below, what is the net cost of purchasing this vehicle? To answer the question, use the following assumptions: -The price of the car is $20,000. -The down payment required is $2,000 -The security deposit required is $500 -The sales tax rate is 10.25%. -GAP insurance on the lease is $300 -Interest lost or foregone is computed using a 4% after tax rate of return (use in Step 4) -The interest rate on the lease and loan is 9% (use in Step 6*). -The lease and loan terms are both 36 months. -Your resale/trade-in value for your vehicle is $6,000 -Disposition fee: $250 -Lease Payment: $325/month -Purchase Payment: $360/month

Answer 1

The net cost of purchasing the vehicle is $17,327.20.

Step-by-step explanation:

To calculate the net cost of purchasing the vehicle, we need to consider several factors:

1. Calculate the sales tax by multiplying the price of the car by the sales tax rate: $20,000 x 10.25% = $2,050.
2. Compute the interest lost or foregone over the 36-month term. Multiply the down payment by the interest rate for each month, then subtract the security deposit at the end: ($2,000 x 0.04/12) x 36 - $500 = $240.
3. Compute the interest paid on the loan for 36 months. Multiply the purchase payment by the interest rate for each month: $360 x 0.09 x 36 = $1,037.20.
4. Subtract the resale/trade-in value from the net cost: $20,000 + $2,050 + $240 + $1,037.20 - $6,000 = $17,327.20.

Therefore, the net cost of purchasing the vehicle is $17,327.20.