To determine the cost of buying versus leasing a motor vehicle, we'll break down both options and calculate the total costs.

Buying Costs:

1. Down Payment: $1,700
2. Loan Payment: $440/month for 36 months
   The total loan payment is:
   $440 \times 36 = 15,840$
3. Estimated Value at End of Loan (Residual Value): $5,800
   This is the estimated value of the vehicle after 36 months, so it's an asset for the buyer.

Total Cost of Buying:
$\text{Total cost} = \text{Down Payment} + \text{Total Loan Payments} - \text{Estimated Value at End}$ $\text{Total cost} = 1,700 + 15,840 - 5,800 = 11,740$

Leasing Costs:

1. Security Deposit: $890
2. Lease Payment: $550/month for 36 months
   The total lease payment is:
   $550 \times 36 = 19,800$
3. End of Lease Charges: $870
   This is an additional cost at the end of the lease.

Total Cost of Leasing:
$\text{Total cost} = \text{Security Deposit} + \text{Total Lease Payments} + \text{End of Lease Charges}$ $\text{Total cost} = 890 + 19,800 + 870 = 21,560$

Summary of Costs:

• Buying Total Cost: $11,740
• Leasing Total Cost: $21,560

Conclusion:

• Buying is cheaper by $9,820 compared to leasing.

Would you like a more detailed explanation or have any questions regarding the process? Here are some related questions you may find useful:

1. How does the opportunity cost interest rate affect the cost of buying a vehicle?
2. What is the depreciation effect when buying versus leasing a car?
3. How does the residual value influence the decision to buy a car?
4. How can I compare other financing options for buying a car?
5. What other costs should be considered when leasing or buying a vehicle?

Tip: When comparing buying and leasing, consider both the direct costs and the potential value of the vehicle at the end of the term.