my personal perspective and why leasing and buying is situational for


give you an anecdotal point of view from my personal perspective and why leasing and buying is situational for everybody's situation so let's pretend like we're buying a subcompact car okay let's just call it like a Honda Civic Toyota Corolla it's essentially a car to get you from point A to point B right so we have one option of buying the car over here we have the other option of leasing the car and in both these scenarios let's pretend like we're going to keep the car so we have a keep scenario so you can buy it or buy it after your lease is up makes sense okay so the purchase price let's pretend like we're gonna be paying seventeen thousand seven hundred dollars for this subcompact car our down payment is going to be two thousand dollars and since this is actually dealing with real math and interest rates and for the sake of not using a calculator I have this all pre written down so bear with me here so the interest rate is going to be four point two two percent this is typical on a car loan if you're a you know eight hundred credit score it may be a little bit lower than this but this is the average rate right now term let's pretend like we're financing this vehicle over the course of three years and then what our payment is going to be using these numbers is actually 465 a month okay so if we're actually gonna be buying this car let's pretend like we're actually selling it as well so our sales price after three years let's just say we're gonna get 12 grand for it okay now with the lease let me use a little different marker here that way we can actually differentiate let's say the down payment because you're not actually purchasing the car is $2,000 the lease term is going to be the same thing as our buy it's going to be three years the payment for this now remember these aren't loan payments these are just payments that you're using to buy the car and hopefully you guys can see this green marker okay 1:59 a month and then the buyback so at the end of your lease term you actually have the option to purchase the car it's gonna be let's call this 12 - right so twelve thousand two hundred dollars okay so let's run through this scenario very quickly here and again hopefully you guys can see those numbers in green so if you want to keep the car we have the buy scenario we have the least scenario okay so for buying the car how much money do we have into this deal so far well we know we have the down payment which was $2,000 okay we know that we paid 465 a month okay for the course of three years so that's four sixty five times thirty six months for 65 times 36 and this equals a total of eighteen thousand seven hundred and forty okay now we're going to lease the car okay but we're gonna buy it back at the end of three years so how much money do we have out-of-pocket for this lease we have our down payment which was two grand okay we have the payments which is 159 a month times thirty six months okay and then we have the buyback price of twelve thousand two hundred dollars a total of 19 thousand nine hundred and twenty four so we can see here just by keeping this car okay to buy the car out right from the beginning cost us a total of eighteen thousand seven hundred and forty dollars over three years of ownership to actually lease the car over three years and buying it back at this purchase price it's costing us nineteen thousand nine hundred and twenty four dollars so obviously you can see that buying the car is more economical now let's pretend like we're giving up the car because most people in their lease there's a higher percentage that actually give back the car after that three year period let's see how very quickly how the math shakes out on that okay so this is for keeping this is for let's call it giving back so remember we have eighteen thousand seven hundred and forty into it for the buy however we're actually selling it for twelve thousand dollars because we own the car after three years so this actually comes out to be six thousand seven hundred and forty dollars okay because think of it like an internal rate of return if we have a piece of real estate that's giving us monthly rent rent rent rent and we go to sell the house not only did we realize the rent but we also realized the the sale of the house the money that we're getting for the house this is similar obviously you're not getting paid to drive your car but you own it for a period of time but you actually have an asset at the end of the three years to be able to sell so we're actually

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