GTakacs

5.5% is annual (Actual APR is 5.64% of 5.5%). You "don't get" any interest at the buyout.

You will be making a total of $13,900 in monthly payments (39x$356) for the usage of $10,000 worth of car. Then after 39 months you can decide if you want to buy the car for $17,000 or just return it and get something else.

The difference between the $10K usage (the difference between the cap cost and the residual) and the $13.9K in payments is the money that the bank makes by lending you the money.

Just for comparison on a typical 5 year loan of $27K with 5.5% interest you would be paying $3934 in interest.

cpd

I beginging to understand, but if my rental charge says 4000, which is how much more I will pay including down payment if I purchase (33 vs.29), thats more like 7.25 % of 29000. Its almost like they allocate the down payment as interest plus 5.5% or something?

GTakacs

interest is COMPOUNDED! If you take a loan for 4 years you will pay 5.5% EVERY year. Actually you will pay 0.458% every month as simple interest is generally compounded monthly (on your credit card it's daily compound) So I'm not sure where you got the 7.5% from, but here is a link for you that explains in detail how to calculate leases.<ul><li><a href="http://forums.vwvortex.com/zerothread?id=794813">http://forums.vwvortex.com/zerothread?id=794813</a</li></ul>

cpd

Thanks GTakacs, between you and that site, I now understand

GTakacs

I'm glad we got it sorted out......