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Learning AI

Each week, we will select two of the AI engines and pose a question or a problem, summarize the findings in our own words, and include the interactions with the AI for your review.

We have been using search engines for a long time and have grown accustomed to entering something like, “best-selling cars,” and then seeing a list of best-selling cars. Pretty cool and search has been the arbiter of many arguments for the last 25+ years.

How many times have you reached for the phone when locked in the heat of a meaningful debate like, “Do Americans buy more ketchup or mustard?” (Answer: ketchup outsells mustard 2:1.)

But how do you use AI, not search, to answer questions? The most important thing to remember when using AI is to always write a detailed prompt. The old computer adage of “garbage in, garbage out,” was never more appropriate than when you prompt AI for an answer. 

When prompting AI, think of yourself as asking your question to a college professor. The more you tell him about the problem you are trying to solve (this is providing context), the more customized the answer will be.

With prompt for search, less is usually more, meaning that you don’t want to restrict the search and you prefer to quickly flip through the results to find your answer. With AI prompts, more is more.

Here was the prompt I used to set up the buy vs. lease question for a car:

I have a salary of $125,000 per year and $50,000 in savings. I am looking at cars that cost about $45,000. Is it better for me to lease or purchase the car?

There is no limit to the length of an AI prompt. I have seen prompts that are thousands of words. (To write better prompts, use this link and go to the AI overview to see the many sites that offer prompting help.)

The advice I give is to think through your problem as thoroughly as possible, then write the prompt. For example, using my prompt above, you may want to add that you are married with two children and plan on working for another 20 years before chucking your career and writing a newsletter.

So, what did the AI engines tell us about the buy vs. lease question?

For example, the AI engines said that if I plan on keeping the car for seven or eight years, it was a better economic decision to buy and finance the car with a 20% down payment ($9,000 of my $50,000). 

Monthly payments would approximate payments under the lease, but I would have an asset with value at the end of the seven or eight years. That car could be sold or traded in as a down payment on my next car.

If I were the person who grew bored with cars after a few years, valued newer technologies, and did not want the financial responsibilities of maintenance, then the AIs said a typical three-year lease was the way to go.

The lease had a smaller down payment, and after three years, I could hand over the keys (or is it now, “hand over the key fob?”), walk away from the car, and lease a new, cooler car to go with my new facial hair and wardrobe.

For a change, ChatGPT came up with something original. It proposed a decision-making shortcut that said,

If you lost your income for six months, would the purchase option, which consumed more of my savings, still feel like a good decision?

If the answer made me feel even slightly uncomfortable, it said I should go with the lease and keep my money in the bank.

Buying or leasing a car is a bit more complex than buying ketchup or mustard. But if you take the time to explain your question and its all-important context to the AI, you are likely to have a productive conversation with something as smart as that professor, but you will set the office hours.

Special thanks to loyal subscriber SHB for suggesting this week’s prompt.

Things I think about

The human brain uses 20% of the body's energy despite being only 2% of its weight.

Response from ChatGPT

I have a salary of $125,000 per year and $50,000 in savings. I am looking at cars that cost about $45,000. Is it better for me to lease or purchase the car?

George — I’ll answer this the way a CFO would think about it.

You make $125k/year and have $50k in savings. You’re considering a $45k car.

The real question isn’t lease vs. buy.

It’s:
Do you want to optimize cash flow, total cost, or flexibility?

Step 1: Frame the Risk

A $45k car is:

• 36% of your annual gross income

• 90% of your current savings

That second number is the one that matters.

Dropping most of your liquidity into a depreciating asset materially reduces flexibility — especially if you’re entrepreneurial (which you are).

Step 2: The Math (Typical Scenario)

Let’s assume:

• Purchase price: $45,000

• 60-month loan at 6.5%

• 10% down

• Lease: 36 months, ~$550–650/month (varies by brand/residual)

Option A: Buy (Finance)

Rough math:

• Down payment: ~$4,500

• Monthly payment: ~$800–850

• Total paid over 5 years: ~$50k+

• After 5 years car worth maybe: $20–25k

Effective 5-year cost: ~$25–30k

But you own the asset.

Option B: Lease

• $600/month x 36 months ≈ $21,600

• Then you either:

  • Walk away

  • Lease again

  • Buy it out

Effective 3-year cost: ~$22k
But you own nothing.

Over 6 years of leasing you might spend $40k+ and still have no asset.

Step 3: What Actually Matters

Lease Makes Sense If:

• You value predictable payments

• You like new cars every 3 years

• You don’t drive a lot

• You want lower short-term cash flow burden

• You want to preserve savings

Buy Makes Sense If:

• You plan to keep the car 6+ years

• You want lower total lifetime cost

• You value ownership

• You drive a lot

• You’re okay with depreciation risk

Step 4: The Bigger Financial Question

At $125k salary, your after-tax income is likely ~$85–95k depending on state.

Financial planners often suggest:

• Car value < 35% of annual gross income

• Total car expenses < 10–15% of take-home pay

You’re slightly above the conservative threshold.

The bigger red flag is savings:

With only $50k saved, I would prioritize:

• 6–9 months of expenses fully liquid

• Investments growing

• Not tying up capital in metal

My Strategic Recommendation (Given Your Profile)

You’re entrepreneurial and opportunistic.

Liquidity = optionality.

I would either:

1. Buy used at $25–30k

   • Preserve capital

   • Lower depreciation hit

   • Own outright or small loan

OR

2. Lease if you truly want the $45k car

   • Preserve savings

   • Lower upfront commitment

   • Reassess in 3 years

I would NOT:

• Pay cash

• Or stretch finances for ego / lifestyle creep

Decision Shortcut

Ask yourself:

If I lost my income for 6 months, would this car feel like a smart decision?

If the answer is even slightly uncomfortable, that’s your signal.

If you want, tell me:

• Your monthly fixed expenses

• State (for tax assumptions)

• The specific car model

And I’ll run a more precise capital allocation analysis.

Response from Gemini

I have a salary of $125,000 per year and $50,000 in savings. I am looking at cars that cost about $45,000. Is it better for me to lease or purchase the car?

Hey! 🚗 That is a fantastic spot to be in—a $125,000 salary and a solid $50,000 safety net gives you a ton of flexibility. For a $45,000 car, both options are very doable, but they serve different lifestyles.

Since you've got the savings to back it up, here is the breakdown of how these two paths look for you:

📊 Lease vs. Buy: The Quick Look

💡 Why Leasing Might Win

If you love having the latest tech and safety features—or if you don't want to worry about the car's resale value dropping—leasing is great. With your $125k income, the lower monthly payments keep your cash flow very liquid.

• The Bonus: You don't have to touch much of that $50k savings at all.

💰 Why Purchasing Might Win

This is the "wealth-builder" move. If you plan to drive this car for 7 or 8 years, buying is significantly cheaper in the long run.

• The Strategy: You could put $10,000 down (using 20% of your savings) to keep your monthly payments manageable. Once the loan is paid off, you’ll have zero car payments and a trade-in value of maybe $15k–$20k toward your next ride.

🏁 My Take for You

Given you have $50,000 in savings, you are in a rare position where you can afford the higher monthly payment of a purchase without feeling the "pinch." Buying is usually the better financial move if you like the car enough to keep it for a while. However, if you're someone who gets bored of a car after 3 years, leasing protects you from the massive "new car depreciation" hit.

Just let me know in the chat if any of these numbers feel off or if you want to dive deeper into a specific model!

Are you the type of person who likes to trade in for the newest model every few years, or do you prefer to drive a car until the wheels fall off?

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