![]() So minus, that's what you're going to get. 18,740 That's what you're going to pay and then you're going to get 12,000 when you sell it, that's just our expected resale. So in the situation where you're buying it if you give up the car you're going to pay the 18,800. You might be thinking okay, Sal, well you know that's if I wanted to keep the car, but I like to always be driving a relatively new car and I might want to actually not keep the car after three years so let's think about that scenario. Often times they might say every mile above 12,000 miles a year is 15 cents a mile or 20 cents a mile and so one you have to worry about that and also you might have to pay even more than this 19,924. If you decided to lease this isn't the only thing that you have to deal with there also tends to be limits on the mileage. The monthly payment was higher so you could only do this if you had $465 a month in order to make this payment and there's also trade-offs here. It's pretty clear that you had to pay in aggregate less to buy. This is really just kind of a a back of the envelope calculation. So when you look just at, you know, just this back of the envelop calculation that we just did what is the total amount of dollars that you had to pay over the three years and I didn't do all the fancy present value and all the rest, there's other videos on that. 12,200 and so if we sum all of that together we get 2,000 plus 159 times 36 plus 12,200 is equal to 19,924. So you're going to have 159 times 36 months over three years and then if you want to keep the car, remember that's the scenario we're thinking about, you also have to pay the buy back. Then you had three years of payments at $159 a month. In the lease situation you still had to put $2,000 down. Now let's think about the lease situation. So the total amount that you paid is higher and the difference between the two is the interest that you're paying. So we have $18,740 and if you're wondering why is this number higher than this number, why is 18,740 higher than 17,700? It's because when you borrowed the money you had to pay some interest. So that's going to be $2,000 plus $465 a month times 36 months gets us to $18,740. So this is essentially the total amount that you would have to put to keep the car out right. So that's going to be 465 times 36, 464 dollars a month times 36 months and then you don't have to pay anything after three years. Then you're going to have three years of payments at $465 a month, so essential 36 payments. So if you want to buy the car and keep it after three years you're going to put down $2,000, you're going to put down $2,000. I'm assuming you've had a go at it so let's work through this. If you want to keep after three years what is the total amount of money you would have had to pay and the amount of money that you would have to pay to keep it and I encourage you to pause the video right now and try to figure that out on your own before we work through it together. When I say compare it let's just do a back of the envelope calculation for if you want to buy it what's the total amount of money that you have had to pay in order to keep the car after three years and the same exact question for the lease. Let's say that the first scenario is a scenario where you want to keep it and in that scenario let's compare the buy option to the lease option. If you want to keep the car you can pay the dealer $12,200 to keep it. So it's a lower monthly payment and at the end of the three years you have a buy back option. You could out $2,000 down and to make kind of an apples to apples comparison we'll have it over the same three years, so this is essentially your agreeing to lease it for these three years paying $159 a month. There's no place that we can just look up the expected resale in three years, but you could use how that same make or model how that has performed in the past three years to get an estimate of what what would it likely sell for in three years. The term is three years, which means if you pay the same monthly payment for the three years at the end of those three years you will own the car out right and then here we had the expected resale. So here you put $2,000 down you're able to borrow the money at a 4.22% interest rate. This other information is essentially the terms of either the loan or the lease. ![]() Your other option is to lease the car, essentially rent the car from the dealership. You have enough for a down payment of $2,000 and so when you buy it you would essentially have to take out a loan for the remainder of the car. You could either buy the car, but you don't have $17,700 sitting in your bank account. The price of the car is $17,700 and you have two options. Let's say you're in the market for a new car and you're trying to figure out how you want to pay for it. ![]()
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