Thank you. I don't think I qualify for any of those. Unless college graduate applies to someone other than a recent grad.
Well I guess what made more sense to me was the explanation. Glad you agree with what I posted as that means we're on the same page, but just have different ways of describing it.
Well I guess what made more sense to me was the explanation. Glad you agree with what I posted as that means we're on the same page, but just have different ways of describing it.
Looking at your numbers below, I didn't see how you calculated the 6.025% comparable interest rate. You applied the MF to the Cap cost plus the RV (43,750 + 25,500) and that's where I got lost. Also I wasn't quite following your description of "effective interest".
Monthly Interest: 48.48 ((43,750 + 25,500) * .0007)
Total interest paid: 1,745.28
So for "borrowing" the 18,250 for 3 years, a total of 1,745.28 was paid in interest. That would equate to an interest rate of about 6.025% which is quite a bit higher than the 1.9% being offered.
Whatever the case, I appreciate your input and I value your posts on this forum. Not many are willing to help people as you do most every day, cheers!
Clear as mud!Excellent, I will try and go through the above. Not understanding what I mean by effective interest rate is probably the key in this. What I mean by that is what is the interest rate actually paid for the loan, lease etc. I got that by looking at the amount borrowed, for the time period it was borrowed and the interest that was paid. I just plugged the numbers into a loan calculator to get the equivalent loan interest rate.
So in my example, the total price of the vehicle was 43,750 and at the end of the lease the RV was 25,500. This means that during the three years the price was reduced by 18,250 and the total rent charge in that period was 1,745. If you go to a loan calculator and enter a loan of 18,250, for a term of 3 years and an interest rate of 6.025% you will see that you pay a total of about 1,745. So effectively you paid 6.025% on that 18,250. If you purchased the vehicle at the end of the lease and financed, you would borrow the 25,500 and start with a new new loan and amortization.
If you look at the loan scenario I did in a previous post which is sort of akin to what happens with a lease. The loan was for 1.6% but paying it off early resulted in a much higher effective interest rate since interest is higher as a percentage of the payment in the beginning of the loan.
The formula for calculating the monthly interest payment on a lease is to multiply the money factor by the sum of the adjusted cap cost and the residual value. That is why I did that. Obviously most times a lease calculator is used but I wanted to do it by hand for the example to break down the numbers.
As another example of the effective interest rate on this example lets assume you decide to buy the car at the end of 3 years and you get a killer rate on a two year loan of 1.68% which is what the MF of .0007 equates to. So the total cost of the car would be:
1. From leasing: 19,995
2. From two year loan: 25,949
for a total of 45,944. Your lease and your loan was at 1.68% but if you go to loan calculator and plug in the loan amount of 43,750 with a term of 5 years and a rate of 1.68% you will see your total payments under that scenario would be 45,644. In order to pay 2,194 (45,944 - 43,750) in interest on a loan of 43,750 for 5 years you would have to have an interest rate of 1.94% which would be the effective interest rate of that entire transaction. As I said a few times, I'm not comparing purchasing to leasing, that is an entirely different discussion for another time.
Hopefully that is all clearer than mud but let me know if it is not.
The calculated 6.025% is just not right. You're not allowing for the fact that you're not just borrowing the depreciation, but RV as well. If you account for that, the effective rate is 1.68% as someone else has stated (what was her name? 
).
Clear as mud!
Not talking about the numbers, I see how that was calculated. I'm talking about how to calculate an equivalent interest rate on a lease versus a loan. What should 'smart money' do when faced with this lease or loan question? To me, that is the whole purpose of all this discussion. You've said your numbers are not about lease vs loan, so that may be your reasoning to stick by your numbers. But I just don't see the value of calculating it the way you do. Besides that it just doesn't make sense to me... sorry.
What matters to me is how much will it cost? Forget interest rates. I see some offers that sound good, but are they?. What I want to know, how many dollars will it take to drive this car for X years. How much will it cost if I want to buy the car over a period of Y years.
I will happily help you. Texas rules !!! To turtle boys post about the lease facts he has everything nailed and the numbers are a good example of a lease. We are simply disagreeing on whether you are borrowing 43k or 18k. We can disagree.You guys are killing me..... my head is spinning with facts and figures. Whenever I get ready to pull the trigger later in the year, which one of you is coming to Texas to be my personal lease vs a cash buy expert at the dealer based on Genesis figures at that time?
it’s because his calculation makes no sense. You have borrowed 43k not 18k. Which was the whole point of my fifty postsWell I guess what made more sense to me was the explanation. Glad you agree with what I posted as that means we're on the same page, but just have different ways of describing it.
Looking at your numbers below, I didn't see how you calculated the 6.025% comparable interest rate. You applied the MF to the Cap cost plus the RV (43,750 + 25,500) and that's where I got lost. Also I wasn't quite following your description of "effective interest".
Monthly Interest: 48.48 ((43,750 + 25,500) * .0007)
Total interest paid: 1,745.28
So for "borrowing" the 18,250 for 3 years, a total of 1,745.28 was paid in interest. That would equate to an interest rate of about 6.025% which is quite a bit higher than the 1.9% being offered.
Whatever the case, I appreciate your input and I value your posts on this forum. Not many are willing to help people as you do most every day, cheers!
Well your example omits a popular money principle called, "the time value of money". Money held today is worth more than the same amount of money received at a later date.You are mixing apples and oranges, when I say I'm not comparing purchasing to leasing I mean I'm not using my example to make a judgment about which one is better. That involves diving a little deeper into some numbers as well as making assumptions about future interest rates, comfort with higher payments, etc. That all can be done but is a different analysis.
I'm sticking with my numbers because they are accurate and that is what they calculate to be. If you notice, no one has disputed any of the numbers because math is math. It is just a matter of understanding the difference between the nominal and effective interest rates and how you can calculate them. Look at it this way, what would it cost you to take out a loan on the depreciation amount for the three years and pay the interest that you are paying with the lease. Again, I'm not comparing purchasing versus leasing in the same time period for the same amount.
What I gave you calculates the interest rate of the lease for that example. You are paying 6.025% for the lease. Again, we are talking about the effective interest on the amount of the price that is reduced by the lease. The residual is what is left after that is done and still has to be paid if you want the car. I showed you an example of purchasing the car after the lease with a two year loan using the same nominal rate as the lease and you saw it costs more than the 1.68%. That is because the rent charge of a lease not only includes the interest paid on the depreciation but on the residual value as well even though you still owe that RV should you want to purchase the car.
Maybe if we have a conversation:
TB: Hi Tonester, the wife told me you bought you car at the end of the lease.
T: Yes, TB. I love it so wanted to keep it.
TB: I don't know much about leasing and purchasing afterwards, can you help me out.
T: Sure, what would you like to know?
TB: What was the initial price of the car for lease?
T: After incentive and everything, it was 43,750. They call that the adjusted cap cost.
TB: So how much did you have to pay to buy it after the lease was up.
T: That is called the residual value and I paid 25,500.
TB: OK, so for the three years of your lease, it reduced the price by 18,250.
T: Yes, that is called the depreciation amount.
TB: So you just paid the depreciation, that sounds like a good deal.
T: LOL I wish, there is also a rent charge each month that is like interest.
TB: How much did you pay in rent charges for the 3 years.
T: I paid almost $50 a month, it was a total of 1,745.
TB: So for reducing the price of the car by 18,250 over three years, you paid $1,745 in interest. What type of interest rate is that.
T: When you lease they give money factor and not an interest rate but if you multiply it by 2400 you can get the interest rate. In my case it was .0007 which equates to 1.68%.
TB: That just doesn't seem right to me. I was fooling around with some loan calculations the other day and the interest you paid on the 18,250 seems higher than 1.68%.
T: Let me check over at Bankrate, I will enter a loan amount of 18,250 which is the amount that the purchase price was reduced during the three years and an interest rate 1.68%. That is odd, it shows only a total of $476 interest.
TB: Let's think about this a bit. By leasing the car you reduced the price of the car by 18,250 and paid 1,745 in rent charges. I bet you they also charged for the residual amount and that is what they are basing the interest rate on. Makes sense but that is like paying interest on a loan the first few years and then refinancing. You pay a lot of interest in the beginning and then have to start over again with the new loan.
T: I think that is what they do, let me plug some numbers in until I come up with the 1,745 I paid in interest. Hey, I got it. If I use an interest rate of 6.025% for a loan of 18,250 for three years I come up with 1,745 in interest charges.
TB: I guess that makes sense. I remember way back learning about nominal and effective interest rates. The nominal is what is stated on the loan but the effective is calculated based off the actual interest paid. I think it can be effected by various things such as compounding, early payoff, etc.
I'm out of ideas so that will be my last way of trying to put the point across.
As far as leasing full term and buying versus leasing, taking the cash and buying out immediately. That you will have to calculate based on the specific numbers of the lease as well as future loan or investment rates.
Thus ends the lesson for today.
tonester and turtleboy I think we can disagree respectfully. The end. Keep the contributions coming to the forum
I'm going to start off by beating the Throat Yogurt drum....
Here's my detail:
- R_SPEC is "for real" and truly as "legit"as they come! If you're buying/leasing; seek him out! Combined with the Circle A Plan certificate and paired with the lease cash incentives this month; provides a potent low haggle and low cost way of getting yourself a G70.
- You need to PM him, before you can do so you have to post 15 times in the forum, it's not that hard I managed to do it.
- In the PM, nicely ask for the Certificate, he will ask for some personal info, Name/Address/phone number/email and you'll get an email with how to generate your certificate (via Hyundai corporate site) for any given G70 you are looking for.
- He works at hyundai corporate his email verified as much, other forum members took the plunge and after their successful venture I felt more secure providing some of my personal info.
MSRP: $50,690
SELLING PRICE: $46,585 (Using Circle A Plan Certificate)
Lease Detail:
Car: 3.3 Sport RWD - Siberian Ice / red/black interior
36/12k
Money Factor .00006 and Residual of 52%
$2500 Lease cash
No Money Down
Monthly: $540.80 x35
Due at signing: $2250 (according to my calculation I'm paying $400 more than I should have but wasn't going sweat it... the process was absolutely easy no hassle no bs, they accepted my terms, they added a little extra for themselves fine...)
Hope this helps other's get better terms/leverage with their perspective dealers.
After you get enough posts reach out to r_spec for the certificate and I'll PM you regarding the dealership I worked with.
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