Mel is buying a scooter priced at $7879.00. She can lease the scooter for $198.80 monthly for 4 years with a residual value of 25% or she can put down a payment of 10% of scooter price and take out a loan for the rest. To repay the loan, she will make biweekly payments of $110.48 for 4.5 years. Which will be the cheaper option in the end? What is the difference in cost?
To find the total cost of leasing the scooter, we first need to calculate the total monthly payments. Mel will make 48 monthly payments of $198.80, totaling $9,510.40 over the 4 year period. At the end of the lease, Mel has the option to buy the scooter for 25% of its value, which is $1,969.75.
Therefore, the total cost of leasing the scooter is $9,510.40 + $1,969.75 = $11,480.15.
Now let's calculate the cost of buying the scooter with a loan. Mel puts down a payment of 10% of the scooter price, which is $787.90. The remaining loan amount is $7,091.10.
Mel will make 117 biweekly payments of $110.48, totaling $12,929.16.
Therefore, the total cost of buying the scooter with a loan is $787.90 + $12,929.16 = $13,717.06.
The cheaper option in the end is leasing the scooter, with a total cost of $11,480.15. The cost difference between leasing and buying with a loan is $13,717.06 - $11,480.15 = $2,236.91. Therefore, Mel can save $2,236.91 by choosing to lease the scooter instead of buying it with a loan.