Question

Annabelle is buying a scooter priced at $5599.00. She can lease the scooter for $110.00 monthly for 4 years with a residual value of 40% or she can put down a payment of 15% and take out a loan for the rest. To repay the loan, she will make bi-weekly payments of $61.43 for 4 years.

a) Which will be the cheaper option in the end?

b) What is the difference in cost?
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Answer 1

[AI-generated answer — Bot GPT 3.5]

Let's calculate the total cost for each option:

Option 1: Leasing
Monthly lease payment: $110
Total monthly payment for 48 months: $110 * 48 = $5280
Residual value: 40% of $5599 = $5599 * 0.4 = $2239.60
Total cost for leasing: $5280 + $2239.60 = $7519.60

Option 2: Loan
Amount to be financed: $5599 - 15% down payment = $5599 - $839.85 = $4759.15
Bi-weekly payment: $61.43 * 26 = $1595.18 per year
Total payments for 4 years: $1595.18 * 4 = $6380.72
Total cost for loan: $4759.15 + $6380.72 = $11139.87

a) Comparing the total costs:
Total cost for leasing: $7519.60
Total cost for loan: $11139.87

Therefore, leasing the scooter will be the cheaper option in the end.

b) The difference in cost:
$11139.87 - $7519.60 = $3619.27

Therefore, the difference in cost between leasing and taking out a loan will be $3619.27.