While the calculations for determining the monthly lease cost for a vehicle are complex, the following table may serve as a useful illustration. It is for a $10,000 vehicle, purchased or leased with no down payment for three years. We will assume that the vehicle is expected to depreciate by half over that period. Some vehicles have higher depreciation rates than other vehicles, but 50 percent is about average for three years.Keith wants to buy his first vehicle for $10,000. The dealer will sell it to him over three years at eight percent interest or lease it to him for the same rate over the same period. The vehicle has a residual value of $5,000 at the end of the lease. Using the table, which compares lease and purchase monthly payments, if Keith has no down payment, calculate how much less his monthly lease payments will be than his monthly purchase payments?
