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- [00:02]
Robert Kroke
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- [00:25]
Austin Hankwitz
So good, so good, so good.
- [00:27]
Robert Kroke
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- [00:52]
Austin Hankwitz
Hey everyone, and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by public.com by the end of this episode, you'll understand the real math behind leasing versus buying a car, and you'll know exactly which option makes sense for your financial situation. My name is Austin Hankwitz and I'm joined by my co host, Robert Kroke. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a multimillionaire in my late 20s with a background in finance and economics. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance and mindset. So Robert, what are we going to be talking about in today's episode?
- [01:32]
Robert Kroke
In this week's episode of the Rich Habits podcast, we're tackling one of the biggest financial decisions most people make every few years. Should you lease or buy your next car? And we're not going to give you the generic answer you've heard a million times. We're going to break down the actual math, expose the hidden costs most people miss, and show you exactly how to make the right decision for your situation.
- [01:55]
Austin Hankwitz
Car prices are insanely high. I mean, the average new car has skyrocketed to over 50 something thousand dollars. Used cars aren't much better. I mean, they're averaging What, Robert, like 25, 27,000 doll now. And the worst part is the second you drive the car off the lot, it instantly loses thousands of dollars in value in just the first year alone. New cars depreciate by between 15 and 30% depending on the car.
- [02:21]
Robert Kroke
So the burning question becomes, do you lease that depreciating asset and trade it in every few years? Or do you buy it, keep it long term, and ride out the depreciation Most people have strong opinions on this, but very few actually run the numbers and understand the numbers and how it affects you.
- [02:39]
Austin Hankwitz
So by the end this episode, you're going to know whether if leasing or buying is the right move for you. And more importantly, you'll know how to avoid the expensive mistakes a lot of people make along the way. So, Robert, let's start with the basics. What does it actually mean to lease versus buy, right? So let's set the table here. Make sure everyone understands exactly what it means to lease a car versus to buy a car. Because a lot of people don't understand what they're signing up for. And the dealerships love that confusion, right? So when you buy a car, very straightforward, you either pay cash, which like, congrats, you're rich, or two, you take out a loan, which is what a lot of people do. Now, if you take out that loan, right, you're financing it, you're making monthly payments toward owning the vehicle one day, right? Eventually I will own this vehicle once I pay it off. Now, once the loan's paid off, the car is yours. You own it, you got the title, it's free and clear. You can drive it till the wheels fall off, you can trade it in, you can do whatever you want, right? It is your car. So that's owning and buying a car. Now on the flip side, you have leasing. When you lease a car, you're essentially renting it it for a set period of time, usually two to three years. You're paying for the depreciation of the vehicle during that time, plus interest and fees. So at the end of the lease, you return the car back to the dealership. You don't own anything. You walk away with no equity in your car itself. And you've been making payments for three years now, and you have nothing to show for it.
- [04:01]
Robert Kroke
So here's the trade off. Lease payments are usually lower than loan payments because you're not financing the full value of the car. You're only paying for the portion of the car's value that depreciates the during the lease term. So think 24, 36 months. So on the surface, leasing looks attractive. Lower monthly payments, you get a new car every few years and you're always under warranty. So you guys need to make sure you're taking a lot of notes in this episode because we're going to break down a ton of math. But here's what most people miss. Over the long term, leasing is almost always more expensive than buying. And we're going to prove that to you with the real math in just a minute. So before we get into the numbers, let's talk about who leasing makes sense for. Because, look, there are situations where leasing is the right call. It's just way fewer situations than car salesmen would like you to believe.
- [04:53]
Austin Hankwitz
Yeah, so let's talk through that. Right. Who should be leasing a car? So leasing might make sense if you fall into one of these categories. Category one is you're a business owner and you can write off those lease payments. If you're using the car for business purposes, you can deduct the lease payments as a business expense. Math changes significantly. Secondly, once you look at the after tax numbers there, right. You get that business deduction saving you money at the end of the year. Second, if you absolutely need a new car every few years and you are willing to pay for that preference. Right. Some people just like having the latest model with the newest tech. And if that's important to you and you understand that you're paying a premium for it, that's fine. You earn your money, spend it any which way you want. We're not here to tell you what to do. Just make sure you're doing it with your eyes wide open and you're not lying to yourself about the cost.
- [05:39]
Robert Kroke
Yeah, I fall into this category because I am a business owner and I don't like friction. So I've been trading out of leases for decades because I like the convenience of having a new car under warranty and I don't have to mess with anything. But it's important to understand all the numbers so you see where you fit in. And that brings us to number three. If you drive very low mileage, typically under 10 to 15,000 miles per year, most leases come with mileage limits. So you have to think this through because if you go over, you're going to see in the fine print you're going to pay 25 to 30 cents per mile in excess fees if you go over. And that adds up fast. But if you work from home, live close to everything and don't drive a ton, leasing penalties definitely won't destroy you. And number four, if you absolutely hate dealing with maintenance repairs, when you lease, you're typically under warranty the entire time. You're not paying for major repairs, you're not dealing with unexpected breakdowns. You drive the car for three years, hand them back the keys, walk away or lease another one. So for some people, that peace of mind is worth the premium.
- [06:46]
Austin Hankwitz
Now, even if you fall into one or more of these Categories, you still should be running the numbers, right? Because in most cases, buying is going to be a better financial decision. So to Robert's point, take out the notepad, get your pen ready. We're going to go through some math here, right? So this is the real math behind leasing versus buying. Real world comparison. We are going to use a $40,000 car, which I would believe is a pretty standard price for something like a to Toyota or a Honda. Robert and I found a couple brand new Toyota RAV Fours here in Nashville at about 40,000. So these are real numbers, right? Nothing crazy, just a normal reliable car that most people would buy. The number one most popular car in America is Toyota. And then I think it was Ford, Chevy and Honda. But the Fords and the Chevys were all trucks for business owners. So most average Americans are buying Toyotas and Hondas. So that is our instance example here. So in the first scenario, you lease that $40,000 car for three years. Based on typical lease terms, your monthly payment is going to be about $450 over three years. That's $16,200 in lease payments. At the end of those three years, you return the car. You don't own anything, you don't have any equity, and now you need another car. So you lease again another three years, go by another 16,200. And now you've got six years, $32,400 on lease payments, and you still don't own a car and you still are making these monthly payments. So that's scenario two is, let's say you buy that same $40,000 car, but you do it with a loan. Things are different, right? So the first difference here is the down payment of $4,000. In our situation, 10% down on a car loan is pretty average and normal. So just be prepared for that. You got to have that money there. So you put $4,000 down and the other $36,000 is financed at, let's say a 6 or 7% interest rate over five years. Your monthly payment is about $696 a month. In that instance, yes, it is materially higher than the lease payment, about $246 more. But the difference is after five years, you pay off the car and you own it, right? The loan is paid off, you can keep driving the car for another five years or whatever you want to do, right? You have zero car payments. Five years where you can redirect that would have been $696 a month payment to investing or saving or paying down other debt that you have. So over that 10 year period of time, roughly $45,760 all in for this $40,000 car when you buy it, right? When you include those interest payments, that's your down payment plus the interest on the loan. But now you own an asset that's probably worth between 8, 10, 12 ish thousand dollars, depending on condition and mileage.
- [09:32]
Robert Kroke
Meanwhile, if you would have leased the same car, you'd have made lease payments, let's say for the 10 years straight. We're 10 years into the ownership, which is roughly $54,000 and you'd own nothing. You'd still need to lease another car or buy another car. But keep in mind you'd never be driving a car that is 6 to 8 or 10 years old. But if you're going to drive it to the wheels fall off. The numbers really do add up to buy. So here's the difference. About 12 to 16 thousand dollars ends up being in favor of buying and that's really being conservative. And if you keep the car longer than 10 years, the gap gets even wider. So this is where people really mess up. They look at the monthly payment and think, okay, it's 450 to lease and it's way better than 697 to buy. I can afford the lease. But they're not looking at the total cost over time. You always hear Austin and I talk about it with houses, with cars you have to understand the total ownership cost. So they're not thinking about the fact that in five years the person who bought the car is done making payments. The person who leased the car is still on the treadmill.
- [10:40]
Austin Hankwitz
I hope everyone followed along there, right? Because we just laid out the real math behind buying a $40,000 car brand new. What you'd have at the end of that 10 year period of time, which is still that 8 or $12,000 versus the leasing of that same car over that same period of time. Assuming you re up a lease, you drive something new, that's cool, right? You get get a new vehicle every three years, but during that period of time, right, $54,000 has left your bank account and it's just gone. And it's going to continue to leave your bank account because you're not actually owning anything, you're signing up for a new lease every three years. So after that five year period of time, you have this $696 a month that's completely freed up. If you're like us, we are going to be investing that money. So it is growing for us over time. And Robert, we all know the best place to invest.
- [11:30]
Robert Kroke
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- [11:50]
Austin Hankwitz
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- [12:08]
Robert Kroke
Match fund your account in 5 minutes or less by heading to public.com rich habits to claim your 1% match today. Paid for by Public Investing. Full disclosures in the podcast Description all.
- [12:19]
Austin Hankwitz
Right Robert, let's now break down the hidden costs that no one is really getting told about at these dealerships when it comes to leasing.
- [12:27]
Robert Kroke
I love this because the dealership's not going to tell you, the salesman's not going to tell you, and I don't think most people actually understand. I did this for several years in car dealerships as a finance manager and I can't wait to share this with all of you listening. First, it's the mileage penalty. Most leases cap you at between 10, 12 or 15,000 miles per year and if you go over, you're paying that 25 to 30 cents extra per mile. So let's say you drive 18,000 miles a year instead of 15. That's 3,000 miles at 25 cents per mile and you're paying an extra $750 at the end of the lease. And that could be every year of the lease. Do that over the lease's cycle of three years and you've wasted 2,250 dol dollars. That's money you're never getting back. Number two, the wear and tear fees. They don't tell you about this, but when you return the car, that dealer is inspecting it with a fine tooth comb and they are not going to be lenient. So any dents, scratches, stains, excessive wear, any of that gets charged back to you at the end of the lease. So you think about that small scratch on the bumper that you tried to touch up. That's going to be a couple hundred bucks staying on the seat, 300 bucks worn tires, $500, maybe $1,000 these fees will add up fast and most people get hit with 500 to $1,500 in wear and tear charges they weren't expecting and didn't budget for. And number three is the disposition fee at the end of the lease. Some dealerships charge a disposition fee, which is usually between 3 and $500 just for letting you return the car. And this is pure profit for the dealer that you're literally paying them to take the car back.
- [14:13]
Austin Hankwitz
This is crazy just hearing all these, I didn't know that, that some of these existing. Here, here's, here's another one that people probably didn't know about. The acquisition fee, right? Because this fee is baked into your, your, your lease terms. So most people don't even realize they're paying it. And it's between 500 and $1,000. It is literally just another way for the dealership to make money off you. Now keep in mind, with all these fees, when you're leasing a vehicle, you want to negotiate price and fe. When you're buying a car, you need to negotiate down the best deal you can get, which then plays in your favor to get a better monthly payment on the lease. And now, Robert, it's so important to talk about the biggest hidden cost of all of them, which is you're always making a car payment. When you lease, you never escape a payment. You're on a treadmill, right? You're a hamster on a wheel, just always making a car payment. Every two or three years you're signing a new lease and you're just starting the cycle over. There's never a point where you are payment free when you buy. Yes, there's higher payments during that loan term, but once it's paid off, you are done. And those payment free years are where you actually build wealth. That's when you take that 6.96amonth, you deposit it on public.com and you invest it into Voo or QQQ or VTI or whatever other ETF tickles your fancy. That's when you use it perhaps to even pay off other debt. That's when you actually can get ahead. When it comes to building wealth is finding the margin in your budget and investing it for your future.
- [15:42]
Robert Kroke
So let's get into the smart middle ground of buying used. You've heard me say this for years and years. If you want a new car and you're going to trade out all the time, lease. But if you're going to get something and you're going to buy, buy it used and drive it to the wheels fall off. And we're going to break that down for you. If you buy a three year old car instead of a new one, someone else has already eaten the worst depreciation in the car's lifetime. So that $40,000 car is now worth 26 to $28,000. So you're essentially getting that same car for a fraction of the price. Same features, same reliability, just three years old. And many times there will still be partial warranty left on this car, but you're not paying top dollar for it. So let's break down the numbers. If you finance a car, 26,000 instead of a card, $40,000, your monthly payment is going to be way lower. So you're taking $480 a month versus $696 per month for the new car. And you still own it at the end. That is why we believe if you're going to keep a car and drive it to the wheels fall off, buy it a couple years old, save all that depreciation. You avoid the massive depreciation hit by a new car. You've heard it for decades, probably from your parents and your grandparents. Once you drive it off the lot, it's worth a lot less. And you get a reliable vehicle used that still has some of that warranty left. And your total cost of ownership is way lower than either leasing or buying new. So keep that in mind. So if you're trying to build wealth, buying a quality car and driving for 10 years is one of the smartest financial moves you can make. That is why smart people that are building wealth actually do this. They don't lease new cars every three years, unless maybe they're a doctor or a lawyer or someone that is, is, you know, important in stature. And they have to have a new car to impress people. They buy reliable used cars and they drive them forever. That's why if you drive through any super wealthy neighborhood and look in the driveways, yeah, you might see a Ferrari here and there. But most of the time you're going to see a used Honda or a Toyota or a BMW or a Lexus. You're not going to see the brand new shiny cars in the driveway because it's just not the right play.
- [17:52]
Austin Hankwitz
So now you're asking yourself, how do I know if I should be leasing or if I should be buying? So here's our framework for that. The first step to take is to honestly look at yourself in the mirror and ask about how long you plan to keep the car. If you're going to keep it for 7, 8, 9, 10 years or more, you should buy it. If you know for a fact that you're going to want to get a new car every two or three years, you should consider leasing. But you need to be honest with yourself about this. And the more honest you can be, the better. Now step two is to calculate your true cost of ownership. You don't just look at that monthly payment. You need to add up the down payment, the monthly payments, the insurance, the maintenance, the fees, all of the things that go into owning a car. Then divide it by the number of years you're keeping that car because that is your real total annual cost of ownership. Run the numbers for both leasing and for buying and see which one actually costs less.
- [18:45]
Robert Kroke
Step three, consider your mileage. If you drive a lot more than 15,000 miles a year, leasing is going to hit you with penalties. So buying probably makes more sense. Step four, think about your cash flow. If lower monthly payments are critical for your budget right now, leasing might give you the breathing room that you need. But understand you're paying for that flexibility long term. And step number five, factor in your business situation. If you're self employed or own a business, you can write off the car. Leasing might make sense from a tax perspective. Talk to your accountant to make sure. And here's one more thing. Don't let a car payment control your life. Whether you lease or buy, keep the payment reasonable. Just because you're approved for a thousand dollars a month shouldn't mean you should buy that. And a good rule of thumb is to spend no more than 10 to 15% of your gross income on the vehicle expenses. And these are all in expenses. So you have to look at payment, insurance, gas, maintenance, everything, the total ownership cost. And if your car payment is eating up 20, 30, 40% of your income, you can't afford that car. And you're sabotaging your ability to build wealth by living beyond your means.
- [19:56]
Austin Hankwitz
Robert, it's pretty obvious that the car industry is designed to keep you in this forever payment cycle, right? Dealers make more money when you lease. They make more money when you trade in that car every few years. When you buy another car, they want you on the car payment cycle treadmill forever. That is their business model. But you don't have to play their game. You can buy a reliable car like me. I have a Toyota 4Runner. It is five years old. You can pay it off and you can drive it for 10 years. You can then redirect those would be car payments to investments on public.com. and you can build wealth instead of actually having to hand over all your wealth to a car dealership.
- [20:36]
Robert Kroke
And the people who build wealth don't drive the flashiest cars. They drive the smartest cars. They make decisions based on math path and not emotion. And they don't let a depreciating asset sabotage their financial future. So be smart, run the numbers, make the decisions that's right for your situation, and don't let a car payment steal your financial freedom.
- [20:58]
Austin Hankwitz
What a fun episode, Robert. It's, it's just so important that people actually run the numbers and they actually understand this stuff. And, and I, I genuinely like, you know, who dreams about having a car payment for the rest of their life. Like, I just, I'm just the type of person that's like, I want to own it, it's mine. I can do whatever I want with it. I don't, I don't owe anyone anything on my stuff. I think once the faster people can come to terms with, sure, you have a lower lease payment in the short term, but you're always going to have a lease payment versus, okay, I have a larger monthly payment on buying, but I know in five years I won't have a payment at all. And I'll have 8, 10, 12, $14,000 of a, you know, value in this asset. Like, it's just so easy to connect the dots there, but people don't do it well.
- [21:44]
Robert Kroke
We say personal finance is personal. I always have a lease payment because I don't like friction. I'm a really busy guy, but the average person, I love it. They should buy, buy it used, drive it to. The wheels fall off, keep it maintained. Well, really, that's just tires, brakes and oil changes for the most part because cars are lasting a lot longer and they're holding equity pretty well now as they get older, especially the Toyotas and Hondas. But personal finances, personal do what works for you. And the main goal here is to make sure you understand the difference and you understand the numbers so you can make an educated decision.
- [22:19]
Austin Hankwitz
Yeah, I, I appreciate that. Call out, right? Because it's like you lease every three years, but it's like, who cares? You're rich. Right? It's like I, I could, you know, I can do whatever I want on the money. I make it, right? And so it's like, yeah, if it doesn't matter what choice you're making, what matters is you are going into making that choice with your eyes wide open and you understand what you're doing, doing right. If you're like, yeah, I'm gonna lease a new car every three years because I can afford it. It's like, cool. You work hard for your money, do what you want to do.
- [22:46]
Robert Kroke
Yeah.
- [22:46]
Austin Hankwitz
But if you're the average American with a household income of like 75 grand and you've got, you know, two kids and, you know, parents and you guys are trying to make ends meet, you want to build wealth over a long period of time. The average American should not be leasing a vehicle. The average American should figure out how to one, buy a used car, Right. And then two, after they buy that used car car, pay it off and then invest the difference. That would be car payment on public.com build their wealth and just don't have so much money on this, like, payment treadmill. I never heard it described like that until we were doing some research into this episode. It's really what that is. It's like a payment treadmill you're never going to get off of.
- [23:21]
Robert Kroke
I'm never going to forget that statement, that's for sure.
- [23:23]
Austin Hankwitz
All right, y', all, so now let's jump to the Q and A section of this episode. As a reminder, you can ask us questions on Instagram via Instagram dms@rich habits Podcast. You can email us questions at rich habits podcastmail.com or, or you can join the Rich Habits Network, which is our community for our biggest fans of the show. We have over 800 people right now inside of the Rich Habits Network and they always get their questions answered because Robert and I every Tuesday evening host a two hour live stream where they can ask us questions face to face. Turn on your camera, say, hey, what's up? My name is Rebecca. Here's my question. So check out the Rich Habits Network. So our first question here though is on Instagram and it comes from K A. K A says, hi guys. I need the matter kept very anonymous. Okay, so ka, I feel like, is a pretty anonymous acronym here. KA says I did the worst thing anyone can do. I over leveraged in a Robinhood margin account and the few stocks that I thought were going to be rock stars all tanked. RIP to all my savings that Robinhood has now automatically sold to cover their own loss. I was willing to, ooh, saw this out and wait until 2026, but Robinhood sold everything. Anything. I'm not sure what to do, where to go from here. Please help. I still have 30,000 in a crypto account on Coinbase, 20,000 in my checking, and I have my retirement accounts, but I'm at a loss for words for how this happened because I was just up a hundred thousand in this Robinhood account in September. Now it's all gone. God help me through this. What do I do? Oh man. K a well, first off, I'm really sorry to hear that you're having to learn this lesson the hard way, my friend.
- [24:58]
Robert Kroke
Friend.
- [24:58]
Austin Hankwitz
We always tell people to avoid going into debt to invest and unfortunately Robin Hood makes it very easy for people to take on debt to invest. So here's, I'm thinking what sort of happened? And Robert, correct me if I'm wrong, but ka, let's say had a account worth a quarter million dollars. And this quarter million dollar account on Robinhood was invested into a bunch of crazy high beta stocks like space exploration, quantum computing, you know, nuclear energy. All the high beta, high flyers that have been exciting in this AI cycle that we've seen and we very much saw a market correction in those names. I think some of them were down 30, 40, 50% in just a couple weeks time. And what you probably did, KA was you went to Robinhood, you turned on your margin investing, they said, sure. Do you want an extra quarter million dollars to invest 300, 400,000, no problem. And you took it and you use that money to buy more of these high beta stocks. So what ended up happening to my understanding is the stocks that you bought with this debt declined in value so much and so quickly that Robinhood sold all of your existing investments to cover their losses on loaning you this money. That's the situation we're in right now. Silver lining one, you are going to be just fine. You said you made a hundred grand in September alone in this account. Like you're very much a, I'm sure a, a very knowledgeable and active sophisticated investor. Like you're gonna, you're gonna remember this and this will be a opportunity for you to learn and to build wealth in a more prudent and responsible way over time. Another silver lining, Robert, is that they already have, you know, 20,000 or 30,000 in their, their, their crypto, the checking, the retirement accounts, like everything's fine. So like we're talking about a high risk account that it seems like you were just on the wrong side of a trade for. My biggest advice for UKA going forward is to one, never take on debt to invest. It is a terrible idea. People do it all the time and this is what happens.
- [27:03]
Robert Kroke
Yeah, I love this question because it helps not only K a learn from the mistake, but it helps all of our listeners learn that when you put yourself in harm's way with heavy debt and margin on an account. And you blow up an account like this, you're starting over because you get liquidated. This is not something, we don't call this investing. I look at it as more as gambling. I just look at it if you can't afford to buy the stock and I thought the stock choices were great because you did it with leverage. You weren't able to withstand the volatility that is the problem. So just learn from this K A and everyone else listening. Don't buy. Don't get a HELOC loan to go buy Bitcoin. Don't go sell real estate to leverage an account. Don't do those things things. Invest with cash, invest with new cash that you have to put into the markets. And don't try to do a cheat code to get around it because it usually ends up going bad like it did here for Ka.
- [28:00]
Austin Hankwitz
Couldn't have said it better myself. Robert, everybody, please, please, please do not go do this margin investing now. It's different. Robert, let's explain this difference. It's different if you are someone like Robert myself and you have a portfolio of a million dollars and you want to take out a $50,000 loan against your at a very favorable interest rate to go do something. Right. I've done that in the past. Much more favorable interest rates that way because it's a collateralized loan. So that's, that's a different story, right? That's money taken out that is then used to go purchase something to go, you know, do something of, of purpose with that is not. I'm taking on debt to invest.
- [28:41]
Robert Kroke
Yeah, I feel like you're exactly right. And I'm okay with people using margin if they have the money to replace it and get rid of of it. Because so many people don't realize don't use margin because you're trying to buy more and you don't have the money to replace it because if you get margin called, your account is blown. And so I'm okay. I've been in a situation before where it's one o' clock in the morning and I find an awesome thing that I want to buy but I don't have any cash sitting at that time. So I'll use margin and then move the money over the day, the next day or a couple days later, get back out of the margin so I'm not eating fees and be able to keep rocking and rolling. So just make sure you understand the difference.
- [29:16]
Austin Hankwitz
So our next question comes from Brock S on Instagram, Brock says, hey guys, I love the show. I know you all always discuss QQQ and voo, but is there any harm in buying QQQM and SPYM instead since they are cheaper to own from an expense ratio perspective?
- [29:37]
Robert Kroke
Yeah, I'll take this one. So here's the deal. Just so everyone understands, like if we use QQQ as an example, I like Q liquidity, easier to get in and out of. And yes, the expense ratio is a little higher, but if you're trading or you're moving any money and you're not a long term holder of that money and it's just sitting there, then QQQ is great. QQQM is really good. If you're a long term holder of QQQ and you want to have this lower expense ratio, lower cost to operate, and you're just going to hold it forever and keep dollar cost average, then I agree there is no problem with using QQQM or SPYM if you're a long term holder.
- [30:20]
Austin Hankwitz
So Brock, this is a really cool question, right? Let's talk about VOO versus spym because that is probably the one with like the most negligible difference here. So Voo's expense ratio is 0.03% where spy M's expense ratio is 0.02. Right? So we're talking about 0.001% difference of an expense ratio, which means for every million dollars you have invested, it's about a hundred dollars more to use VOO than spym. So you're talking about a hundred dollars, but that is just on that one year instance, right? Money compounds over time your million dollars will grow, which means the expense you pay will grow. So during a one year period of time it's $100 difference, but over a 10 year period of time it's actually about a $2,300 difference. Over a 20 year period of time it balloons to a $12,000 difference. And over a 30 year period of time it actually comes in at about a $50,000 difference between SPYM and Voo. But again Robert, we're over here talking about a $50,000 difference, right? That you'd pay more if you held VOO ever SPYM them on a 35 million dollar balance. So like I guess what I'm saying is the expenses add up assuming you have a massive portfolio of tens of millions of dollars. If you are like the average person where you've got $751.8 $2.6 million in your retirement accounts And a good chunk of that is in V. Congrats. Like, you're doing the right thing. Right. And it's not going to materially impact or be a, you know, we're talking about a hundred bucks here or there. It's not that. It's not something that is like, crazy if you're doing one thing or another. So you said, is there any harm in buying QQQM and SPYM instead of QQQ and voo? No, there's no harm in doing it. You'll save a couple dollars a year in the expense ratio, so. Good question, Brock.
- [32:22]
Robert Kroke
It is a great question.
- [32:23]
Austin Hankwitz
Gotta give a shout out to Blossom. You guys have heard us beat the drum on this one all year long. But if you haven't already considered checking out Blossom Social Network, you really gotta go give it a try. We know a ton of our Rich Habits podcast listeners made it tour earlier this fall and they said that they had a lot of fun. Really cool how they're bringing and connecting investors together from all across the country.
- [32:43]
Robert Kroke
Yeah, I've heard people call it the Facebook for investors, and that's exactly the way to think about it. We're enjoying spending so much time on the platform and they do a really good job.
- [32:53]
Austin Hankwitz
We're on Blossom because the community is different. Right. People actually share their strategies, their wins, their lessons. It's open, it's supportive, it's transparent.
- [33:01]
Robert Kroke
Exactly. You can follow us, see our real holdings, even track when we add a position position. It's like learning by seeing from real portfolios, not random opinions.
- [33:11]
Austin Hankwitz
So if you're serious about building wealth or just want to surround yourself with investors who think long term, be sure to join Blossom. It's completely free. It's very fun. We're both on there. There's a link in the show notes below. Our final question comes from Sean on Instagram. Sean says, My name's Sean, turning 25 next month and I make 75, 000 a year. And in the next couple months I'll get a promotion for120,000 a year. I have $19,000 of student loans debt, and I bought a new car that I definitely thought more with my heart than my head on when I was buying it. The loan is $36,000 left to pay on it and I pay about $900 a month between the car payment and the insurance. My parents said they want to help me out and cut me down to $600 a month. I know this isn't the smart way to go about things because I shouldn't be wasting money on a new car, even if I use it a lot. But I really don't want to burden my parents either. I've shopped the car around. It seems like I'd be lucky to get 30 or maybe 31,000 for it. Do I sell it at a loss? Do I trade it in? Do I keep it? What do you guys think about my situation? I've got 12,000 in my brokerage account, and I just opened up my Roth IRA and deposited a thousand into that. Thank you for all you do. Well, we just talked about, you know, cars in this episode, didn't we, Robert?
- [34:23]
Robert Kroke
We did. And I'll take this one. I'll start this one. I think you should ride it out. Given the fact that you're going to be making more money and substantially more money, I think you should ride it out because negative equity stinks. And I don't want to see you go $6,000 in the hole on this car. You obviously enjoy the vehicle. You're going to be making more money. It fits within your debt to income ratio. So I think you're fine. And as soon as you pivot over to this higher rate in the next month or so, I would then take your parents off the hook. Unless they're really rich. If they're really rich and they want to help you, then so be it. Let them help you, good for you. But otherwise, take them off the hook. Hook. Pay the payment, forget about it. Don't stress about it because you can always make more money. And I would hate to see you go backwards by trading it into another car and eating that 5, 6, $7,000 in negative equity.
- [35:14]
Austin Hankwitz
Yeah. Sean, you are 25 years old. You don't need your parents paying your car for you. You were going to make 120k a year here even if you didn't. Right. Your $900 payment, like, isn't that crazy? It's, it's up there, but it's not insane. You know, you're taking them 42, 45, $4,700 a month. I guess, depending what's going on with your taxes and contributions and retirement and health care and stuff. $900 of $4,500. Like, you can still pay your rent. You can buy groceries. Like it. I think it fits into your general budget here. It's definitely on the high end, you know, 20% or so, but it's, it's not crazy. And then after you get this promotion of 120k, like, dude, you got that all day long. $7,500 a month is what you'll be taking home. Something like that, right? 900 bucks, like all day. So I agree with Robert. I keep the car. If you want to pay it off a little bit more aggressively because it's at a higher interest rate, 8, 9, 10%, be our guest. If you wanted to make extra, you know, deposits on your brokerage account, your Roth ira, if you want to keep that car around, not make any extra payments at that 120k a year, it should be fine too. I don't see anything too crazy with this. Like, yeah, 900 bucks a month is a lot. But you said you are contributing to your Roth ira and like, that's like, what, what makes sense to me here is like, you're not keeping this car at the detriment of investing into your Roth IRA at 25. Now, if you were keeping the car and you couldn't afford to max out your Roth ira, ira, time to sell the car. I don't care about the loss. Go borrow the difference. It's like way smaller of a monthly payment there. Uber to work, right? Not really, but you know what I'm saying, like, you got to prioritize the Roth IRA in this investing. And at this 120,000 a year, you should absolutely be able to afford both of them.
- [36:50]
Robert Kroke
Happy Thanksgiving, everyone. Thanks for joining us for this episode. We think it was an incredibly insightful episode to help all of you understand the difference between leasing and buying buying and the total ownership cost of a vehicle. So thank you again for stopping by and make sure to share this episode with a friend. Because everyone has this struggle with what to do when getting a new or a used car.
- [37:12]
Austin Hankwitz
Yeah, if you learn something in this episode about leasing versus buying a car, you've got that friend that's like, nah man, you always got a lease. Or nah man, you always gotta buy. Or maybe they don't even have an argument. They genuinely don't know how to think about it. Maybe it's a recent college graduate or a colleague at work and send them this episode. Episode. Right. We lay out the math. We give you some situations in which you should lease or consider leasing. Other situations where it doesn't make sense and you should consider buying. We just try and give you all the facts so you can make an educated decision with your money. As always, if you learned something, please consider leaving us a five star review. Sharing a comment on Spotify voting in the poll below. Subscribing on YouTube if that's where you're watching us here. And don't forget we're still running a seven day free trial for the Rich Habits Network, our community for our biggest fans. Go click the link in the show notes below to check that one out. Thanks everyone and have a great start to your week. Sam.