An off-road sport utility vehicle is advertised with a purchase price of $43,995.00. Shelli is considering the following options in buying the SUV. Option 1: Purchase the Vehicle with a Loan

Shelli will make a down payment of $8,000 if she chooses this option.

The monthly payments for a loan at 7.95% per year on the balance will be $765.44 per month for 5 years.

Option 2: Lease the Vehicle

No down payment is required, but Shelli will make a down payment of $8,000 if she chooses this option.

The lease rate is 7.75% per year for 4 years.

The monthly lease payment is $626.25 for 4 years.

To buy the SUV at the end of the lease, it's buyout is 38% of the original value.

Calculate the total cost to own the SUV for each option. Which option is the cheapest for Shelli and by how much?

Option 2, by $851.70

Option 1, by $1,002.75

Option 2, by $1,002.75

Option 1, by $851.70