Ted is considering either buying or leasing a new pickup truck. If he buys the truck, taking a down payment and 3-year loan, the total cost would be $40,259.88 with monthly payments of $1,022.60. If he leases it for 3 years and then buys it, the total lease cost is $13,416.80 with monthly payments of $447.23. Buying after the lease would cost $27,320.32 total. Leasing may be more economical and offers advantages like lower monthly costs and no risk if the vehicle is totaled.

1. Applied 40S Leasing a Vehicle
1. Ted, a construction worker, wants to buy a new pickup truck priced at
$36 699.00 plus PST @ 7% and GST @ 5%. His current truck has a
trade-in value of $6800.00. What is the total cost of the truck if Ted
has $3500.00 for a down payment, and takes out a three-year loan at
8.5% for the balance? What is the value of each monthly payment?
2. Ted also considers leasing the truck (still priced at $36 699.00) for
three years. He is able to use the old truck valued at $6800.00 plus
$3500.00 as the down payment. The lease rate is 7.3%, and the
residual value is set at $22 499.00. What is the total cost of the lease?
How much is the monthly lease payment?
3. At the end of the three-year lease, Ted may decide to buy the truck for
the residual value, plus PST and GST. He would take out a two-year
loan at 7.5% to pay for the truck. What is the total cost of the truck
after the loan for the residual value is paid off?
4. Which is more economical - buying the truck (#a) or leasing the truck
and then buying it later?
5. What are some advantages of leasing rather than buying the truck that
Ted might consider?