Question

Leasing a car for a five-year period usually costs about the same as a five-year loan because __________.
a.
five-year leases are considered more risky and come with a higher interest rate
b.
the longer time period over which to pay the leasing company creates a higher monthly payment
c.
if you lease a car for five years, the leasing company transfers it to a sale with the same monthly payment
d.
even with the lower monthly payments, leasing a car for five years requires a second lease agreement, which comes with additional fees


Please select the best answer from the choices provided.

A
B
C
D

Answer 1

A

Leasing for a longer term (like five years) is considered riskier by lessors (residual value uncertainty), so they charge higher finance (money-factor) rates and depreciation allowances — making the total cost similar to a five‑year loan.