Question

leasing a car for a short time is usually cheaper than buying the same car since ______.
a. insurance premiums are lower for leased cars
b. leasing generally comes with a lower interest rate
c. people who lease cars are considered more responsible than those who buy
d. in leasing a car you pay only for the depreciation of the car rather than the total value

please select the best answer from the choices provided.
a
b
c
d

Explanation:

Analyze the mechanics of leasing vs buying

When buying a car, the monthly payments are calculated to cover the entire purchase price of the vehicle plus interest over the loan term. When leasing a car, the lessee only uses the vehicle for a portion of its useful life (the lease term). Consequently, the lease payments are calculated based primarily on the vehicle's depreciation during that specific period (the difference between the initial capitalized cost and the residual value) plus interest and fees, rather than the total value of the car.

Evaluate the given options

• Option A is incorrect because insurance premiums are determined by personal driving history, location, and coverage limits, not whether the car is leased or owned.
• Option B is incorrect because interest rates (or money factors) on leases are not inherently lower than those on purchase loans.
• Option C is incorrect because responsibility is a subjective personal trait and does not dictate the financial structure or cost differences of leasing.
• Option D is correct because lease payments are structured to cover only the depreciation of the vehicle over the lease term, making it cheaper for a short-term period compared to paying for the entire asset value.

Answer:

• a. insurance premiums are lower for leased cars
• b. leasing generally comes with a lower interest rate
• c. people who lease cars are considered more responsible than those who buy
• d. in leasing a car you pay only for the depreciation of the car rather than the total value (Correct answer)