Earl would like to drive a brand new $68 500 truck. The car dealer has provided Earl with three options. All three options involve a down payment of $2500, and an annual interest rate of 3.9%/ a compounded bi-weekly for the loan option.
Option 1 purchase the vehicle and make a loan for a 4.5 yr term
Option 2 Lease the vehicle for 4 yrs with monthly payments of $1580 and buy the vehicle at the end of the lease for $22500
Option 3 Lease the vehicle for 3 years with monthly payments of $1390 and buy the vehicle at the end of the lease for a residual value of 40% of the original price of the new truck.
A) Which option has lower monthly payment?
B) Which option is cheaper overall?
C) Which option would you pick? Why?
A) Option 3 has the lowest monthly payment of $1390.
B) To determine which option is cheaper overall, we would need to calculate the total cost of each option including the down payment, interest, and any additional fees. However, without this information, it is difficult to determine which option is cheaper overall.
C) The best option would depend on Earl's individual financial situation and preferences. Option 3 may be more cost-effective in the long run because Earl would own the vehicle at the end of the lease term. Option 1 would also eventually allow Earl to own the vehicle, but it would take longer to pay off the loan. Option 2 may be more suitable for those who prefer flexibility and potentially lower monthly payments, although it ultimately results in a larger final payment to purchase the vehicle. Ultimately, Earl would need to consider his financial goals, budget, and preferences when choosing the best option.