Mike leases a new pickup by paying $2800 up front and $286 a month over three years. The lease also stipulates he will be charged $0.15 per mile for every mile over 36,000. If he puts 42,324 miles on the truck, what will be the total cost of the lease?
Answer (2)
The total cost of Mike's lease for the pickup truck is $14,044.60. This includes the upfront payment of $2,800, total monthly payments of $10,296, and an additional charge of $948.60 for excess mileage. Understanding each component of the lease helps in budgeting effectively.
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Calculate the total number of months: 3 × 12 = 36 months.
Calculate the total cost of monthly payments: 286 × 36 = $10296 .
Calculate the number of miles over the allowance: 42324 − 36000 = 6324 miles.
Calculate the cost of the extra miles and add all costs: 2800 + 10296 + ( 6324 × 0.15 ) = 14044.60 .
Explanation
Understanding the Lease Costs First, let's break down the costs associated with Mike's truck lease. There's an upfront payment, monthly payments over three years, and a per-mile charge if he exceeds the mileage allowance. We need to calculate each of these costs and then add them together to find the total cost of the lease.
Calculating the Lease Duration Next, we need to calculate the total number of months in the lease. Since the lease is for three years, and there are 12 months in a year, the total number of months is: 3 years × 12 year months = 36 months
Calculating Total Monthly Payments Now, let's calculate the total cost of the monthly payments. Mike pays $286 per month for 36 months, so the total cost of the monthly payments is: 286 month dollars × 36 months = $10296
Calculating Excess Mileage Mike drove 42,324 miles, but the lease only allows for 36,000 miles. So, we need to calculate how many miles he drove over the allowance: 42324 miles − 36000 miles = 6324 miles
Calculating Excess Mileage Cost For every mile over the allowance, Mike is charged $0.15. So, the total cost for the extra miles is: 6324 miles × $0.15 mile dollars = $948.60
Calculating Total Lease Cost Finally, we add up all the costs to find the total cost of the lease: the upfront payment, the total monthly payments, and the cost of the extra miles: $2800 + $10296 + $948.60 = $14044.60
Final Answer Therefore, the total cost of the lease is $14044.60.
Examples
Leasing agreements are common for cars, apartments, and equipment. Understanding how to calculate the total cost, including upfront payments, monthly fees, and potential overage charges (like mileage on a car or usage fees on equipment), helps you budget effectively and compare different lease options. This math is also applicable in scenarios like calculating the total cost of a subscription service with a base fee and usage-based charges, or understanding the terms of a loan with interest and potential late fees.
