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Amy Lloyd is interested in leasing a new Saab and has contracted three automobile dealers for pricing information. Each dealer offered Amy a closedend36 month
Amy Lloyd is interested in leasing a new Saab and has contracted three automobile dealers for pricing information. Each dealer offered Amy a closedend36 month lease, with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a perimile basis. The monthly lease cost, the mileage allowance, and the cost for the additional miles follow: Dealer Monthly cost Mileage allowance Cost per additional mile Forno Saab 8299 36,000 30.15 Midtown motors 8310 45,000 80.20 Hopkins Automotive 8325 54,000 30.15 Amy decided to choose the lease option that will minimize her total 36month cost. The difculty is that Amy is not sure how many miles she will drive over the next three years. For purpose of this decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Amy estimated her total costs for the three lease options. For example, she figures that Forno Saab lease will cost her 10,764 dollars if she drives 12,000 miles per year, 12,114 dollars if she drives 15,000 miles per year, or 13,464 dollars if she drives 18,000 miles per year
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