The cost of leasing the vehicle during the contractual lease period consists of Bonny's lease payments plus the initial down payment.

Total monthly lease payments are:

$300 × 48 months = $14,400

Add the initial down payment:

$14,400 + $4,500 = $18,900

Therefore, the total cost of leasing is $18,900, corresponding to option B.

The residual value of $13,450 represents the vehicle's contractual value at the end of the lease. It is relevant if Bonny elects to purchase the vehicle at lease-end, but it is not part of the cost of simply leasing and returning the vehicle.

Similarly, the $1,749 of sales tax associated with the residual value becomes relevant in connection with the purchase of the vehicle at the residual amount. Since the question asks for the cost of leasing—not the combined cost of leasing and subsequently purchasing the vehicle—those amounts should not be added.

This distinction is central when comparing leasing with financing. Lease analysis must separate the cash flows required to use the vehicle during the lease term from the optional amount required to acquire ownership when the lease terminates.

FPII reference/topic: Savings Planning and Debt Management — vehicle leasing; lease payments; residual values; lease-versus-buy analysis.

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