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Rakhi Vasavada, Financial and Legal Consultant

Category: Finance

Satisfied Customers: 4514

Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

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Ur question: "CASH price of a car is $13,883. I can lease

Customer Question

ur question: "CASH price of a car is $13,883. I can lease the car for a monthlly price of $400. after 24 months I can buy the car, BUT, the depreciation that will be used is $313 a month. So there is $87 dollars a month "expense". What is the effective interest rate t..."

Hi from just answer. I'm PDtax. Your first expert opted out, so I can assist.Are you doing a lease v. buy scenario? If so, What is the purchase price after the 24th month? I would typically ask you the implicit interest rate in the lease as well.

Hello and welcome. Thank you for providing an opportunity to assist you.

As I understand, your Cash Purchase price is $ 13883. As against this, if you go for lease, you would pay $400*24 = $9600 for this.

Having said this, at $313 Per Month, the depreciation cost would be 313*24 = 7512. Therefore, the excess would be $17112 in total as against cash price of 13883 would be 17112-13883 = 3229.

You would be paying more 17112-13883 = 3229.

Therefore, the effective INTEREST COST would be 17112 23.25% total i.e. 11.62% ANNUALLY, FLAT.

I am sure this would help.

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