VPN + AdGuard Home vs VPN alone for privacy?

I am trying to find out what option would be the most beneficial for my privacy. I want my DNS queries to be encrypted so ISP can’t see what I do online.

My understanding is that VPNs encrypt source-destination data requests. But I also want to make use of the trackers/ads blocking of AdGuard Home. What should I do to achieve the best privacy available for me?

This is my understanding of how each of these works:

VPN + AdGuard Home (DoT)

client -> AdGuard Home (DoT) -> VPN -> Destination

ISP and VPN can’t see my DNS requests, but knows that I am using DoT

VPN + AdGuard Home (DNS is set to VPN’s DNS)

client -> AdGuard Home (VPN's DNS) -> VPN -> Destination

ISP can’t see anything about my DNS requests

VPN w/o AdGuard Home

client -> VPN -> Destination

Only VPN can see my DNS requests

Did I misunderstand something? Or is it correct? Or is there a better option out there? Ty

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A lot of VPN providers nowadays offer either ad blocking or custom DNS. So you could probably ditch AdGuard altogether.