An Example of Infinite Banking at Work

The $40,000 Car Comparison

In the Infinite Banking System, most people will purchase a new car or pay off an existing car loan.

This example considers the purchase of a $40,000 car using four methods of payment — three traditional methods and the Infinite Banking Concept.

The main source for comparison will be the total cost.

 
The Assumptions for the Illustration
    1. 44 year time period with a new car every 4 years.

    2. Traditional bank financing and IBC financing will be at 8%.

    3. 5% rate if return.

    4. Residual value on leases will be 35% of actual value

    5. Residual value will allow the same amount financed ($40,000) each time with traditional bank finance and IBC.

    6. Your annual payment, bank financing, and IBC System equals $12,077.00.

 
Option 1: Lease the Car

 

  • $40000 Lease
  • $3000 (or 7.5%) down at Delivery
  • 48 month lease period
  • $850.00 monthly payments
  • 35% residual value
  • 3% inflation 5 % rate of return

 

Total Cash Paid for the Lease of the Cars =
-$868,104
Opportunity Cost =
 $1,637,407
Total Cost =
 -$2,505,511






Option 2: Bank Loan

 

  • 8% Interest Rate
  • Finance $40,000 each time
  • 48 month loan
  • $1007.00 monthly payment
  • 5% rate of return

 

Total Cash Paid for the Lease of the Cars =
-$531,388
Opportunity Cost =
 $1,385,234
Total Cost =
 -$1,916,622






Option 3: Pay Cash

 

  • $40,000 per car
  • 35% residual value
  • 5% rate of return

 

Total Cash Paid for the Lease of the Cars =
-$440,000
Opportunity Cost =
 $1,264,965
Total Cost =
 -$1,704,965






Option 4: The Infinite Banking Concept

 

  • $40000 Car
  • Value of Policy $1,916,622
  • $1007 monthly premium
  • 5% rate of return
Total Paid=
$531,388
Same as would be financed through a bank. Only you paid this to your own policy, so it is a positive number.
Opportunity Cost =
 $0.00
Total RECAPTURED FUNDS=
 $1,916,622





Comparison

 

To begin you must understand the meaning of opportunity cost: the cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used. 

Opportunity cost is an important part of the decision-making process and will be our basis for comparison.

 

 

 

 
 

 

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