If leasing a car is such a bad financial deal, why do so many people do it?
I have gone both routes, buying and leasing, several times. I have concluded, at least for myself and my needs, that leasing is best in most cases.
There are, no doubt, financial folks who can make much more complex arguments on both sides of the question than I can. I can only report what I have experienced.
What I know is that, for the last 9 years, I have been leasing sedans that fall in the mid $20’s to $30,000 range for between $200–$240/mo with no down payment and 15,000 miles per year. I don’t get involved with capitalized costs, depreciation, etc. I don’t know why anyone would bother with all that. All I care about is my monthly payment. I email a several dealers, tell them I’m looking for a 3 year, 15,000 mile/yr, $0 down-payment lease with no additional fees. I don’t care what color the car is or whether it’s a Ford, VW, Hyundai, etc. Within 2 weeks one of those dealers will give me an offer that meets my needs, every time.
Now I have a new car that I won’t have to pay for any service on for 3 years, other than oil changes and wipers. About the time the warranty expires my lease is over. In 9 years I’ll pay between $21,600-$26,000 in lease payments for up to 135,000 miles driven in 3 brand new cars. I have never been able to pay less for ownership once repairs are thrown into the mix. I compare those costs to my wife’s, who buys her cars. Her total cost of ownership is always higher. Additionally, she goes through years 5–10 wondering what’s going to break next and whether it’s best to repair or sell.
Perhaps there are scenarios with higher value cars or situations where you sell the car after 4 or 5 years that work out better for buyers. I don’t have experience with those. I don’t miss selling cars I want to be rid of, that’s for sure.
COMMENTS:
● Or if you like driving and cars: Skip the Corolla and buy a very nice vehicle THAT YOU ACTUALLY LIKE at three+ years old, pay it off in five years, pay less for insurance, drive it until YOU are ready to move on to another vehicle as you pay zero $ in monthly payments. When a repair or maintenance is needed you will have many zero monthly payments saved in your account at the ready.
• Have a 2000 toyota truck, 300k, 2 x yearly oil, Have concierge mechanic (picks up and drops off) every other year but can't find anything to fix. Original everything. (I repainted just because) but take it on roadtrips for comfort. 2105 toyota venza. Same…biggest motors in both, so they aren't under stress. I can buy anything cash, but not needed. Can't say what I've saved over the years. Soon, I'll go basic insurance on the car (truckis only $50 month) another savings of $700. Think I'll stick with toyota…
• Exactly. We've owned our car for 9 years at a cost of about $40K in depreciation and maintenance which is more than 26K but here's the difference. Ours is a 2013 Mercedes ML350 diesel full size SUV that we bought in 2015 with 23K miles on it (probably just off lease). I think that's a much better deal than a series of new econo boxes.
• Not really sure why you think that’s a better deal, but ok.
• how about just go and buy a car you can actually afford? pay cash, done.
● uh, “I don’t get involved with capitalized costs, depreciation, etc. I don’t know why anyone would bother with all that.” ? Because it is your money and you can stop paying a monthly fee.
● If leasing really was a better deal than buying, for the consumer, there would be no viable business model for the leasing company.
My strategy has always been to buy either used or new, take good care of it, and to keep it until it is 20 to 25 years old. Do your own maintenance and light repairs, and find a reputable independent mechanic for the (literally) heavy lifting. The sweet spot is a well-maintained one-owner used car purchased from a private party, ideally someone you know. (You can also buy a 3-to-5-year-old car as it comes off lease. The key either way is to make sure you have a full set of service and repair records.)
I donated my 1996 Audi A4 to my local PBS station 6 months ago. I bought from the original owner in 2005 for $7K and spent $6K, including a MAACO paint job over the 14 years I had it. My $100/month beats yours $200–240, plus my insurance costs were a lot lower, because I didn’t [need to] carry collision coverage, since it was already 9 years old when I bought it.
• Exactly. I have a concierge mechanic, will pick up and drop off. I give him business (oil/plugs/shocks, etc..) on kids cars but he takes excellent care of mine.
● I’ll never lease again. No more concerns about fees for dents & dings, mileage overages, new tires not to mention the constant upselling attempts when getting a simple oil change. I have a clean 10 year old Lexus with low mileage & zero maintenance (other than oil changes) in two years. For people that have cash & want upgrades every few years, I get it. For the average Jane or Joe, do your homework & eliminate that monthly payment. Also, find a trusty mechanic, dealerships are shysters.
Similar here. 14 year old BMW 328i with 105K and runs like a gem and paid off 10 years ago. I’ll compare my savings with anyone who leases, which would be in my favor by many thousands of dollars.
If you are willing to ignore the fact that she still has a car at the end of every period and you do not at the end of your lease, leasing might suit you better.
AMEN AMEN AMEN ✅️ 🙏 🙌 👏 ❤️ ☺️ ✅️
You could say the same about buying a car, it’s a bad deal, a money loser. BUT, a lot of folks want a “new” car no matter how bad a deal it is. So, folks can get in and out (relatively) cheap on a lease, and it’s easier in a lot of ways, guaranteeing them a “new” car every 2–3–4 years. Financially, it is almost never as good a deal as a purchase is.
For me the sweet spot is a newer used car with less than 10K miles on it. For example we recently bought a 2021 Kia with 4K miles for substantially less than a new one.
Taken straight out of “The Millionaire Nextdoor” a fine book on habits one should follow in order to maximize one’s net worth!
I don’t know man, maybe your wife is just buying the wrong cars. I’ve had my Toyota Prius for 17 years, and have had no major repair issues/costs. This was definitely cheaper than leasing.
This is the way. Dave Kinzer I bet writer’s wife doesnt have a Toyota. And from the way they seem to blow money or view money probably wife drives a BMW. they are not built to last. break down the minute you drive it off the lot. half hyperbole half truth.
AMEN AMEN AMEN , Same with my 2014.5 black toyota camry se sport, It just recently reached 37,000 ,Mike's n run just like it did when I first bought it ❤️☺️🙌🙌🙏😎♥️
Toyotas are the best. Our son has one, bought a 2013 a few years ago. Hasn’t spent a dime.
● Research has shown that it is financially best to buy a car that is between 1–3 years old and to sell it before it hits that 5 year mark.
• Unless it's a luxury vehicle.
• What research? Can you share any links to this?
• Yeah I’d like to see that research too
• It’s literally just looking at the depreciation curves, and maintenance schedules.
• I recall reading something that said that and showed average new car depreciation. Something like 20% in the first year but then only another 20% for the next few years and then starts to drop off fairly quickly after that. So they said best to buy 2 years old and sell at 5. Something like that to minimize depreciation but enjoy a newer vehicle.
• Ron Blue, 1986.
• Nope - I buy vehicles that are 40–50 k , keep for 7 years and 90kish miles and move on. Replace one set of tires and that’s it with exceptions with front brakes occasionally. Value of vehicle goes down 24–32k during that time. I sell on my own most times
• Research has shown that the cheapest car to drive is the one you already own.
• 3 years seems iffy, to me. I used to buy cars that were a year or two old. Our two Leafs were each a year old, off-lease. Econoboxes lose 50% in a year. But then, some Luxury cars lose that in 2 years. Like Lincolns or Caddys. We’d like to get rid of the Leaf that is never driven, now that we are retired, and get a used Lexus. Like used pickup trucks - cars like that hold their value forever! When we bought ours, we would have saved little, buying one that was 1–2 years old. Plus, you’d lose the warranty.
● I lease my crossover and own the sedan. This way, if I need to save a bit on the leased one for long road trips, I over use the bought one. Best of both worlds.
Since your wife always buys, looks like you average out the same way. :)
One advantage of leasing is that you don’t just new cars, you get a tech upgrade every 3 years as well.
● I’ve also leased and owned over the last 40 years. I am coming off a 2 yr no money down lease for a 17′ Equinox 2LT with leather, etc for $200/mo and I have to concur with the assessment that it is better to lease than buy, assuming your goal is simply to be able to get from point A to point B for the least amount of money & worry. However, that conclusion to some extent is analogous to picking a restaurant based purely on cost and convenience — as long as the food doesn't get you sick and it's reasonably close, then go for it. You've discounted the entire experience aspect of the decision — where do you like to eat out based on the quality of the food, how the wait staff treats you, the ambiance, the interior decorations and layout, etc. If food becomes simply “fuel" and you can get it anywhere, then you would go for the least cost approach in choosing a restaurant as well.
But not everybody picks restaurants that way, and the same holds true for cars. I spend about 1.5 hrs daily in my car. I like a nicely appointed cabin, good audio system, comfortable leather seats, and not a lot of road noise. For this next car, I'm using JD Powers to identify which 08′ or newer luxury car with <100K miles can be bought for <$10K (there are quite a few). I'll drive it for ~3 yrs, quickly sell it for $3K to $4.5K less than I bought it depending on the miles/make/model, and assuming I stay away from cars with timing belts and known expensive repairs (such as 05′ to 08′ E350's), I expect to keep my depreciation plus repairs (excluding oil changes, tires, etc) to less than $12K-$18K for the next 9 yr, 110K miles period (I don't drive 15K mikes/yr). Granted there is some additional risk that something major could break, but it would need to occur more than once in order to make the math work in favor of leasing. Plus I found that I take better care of my purchased cars than my leased cars, and I hate the turn in process where suddenly the door dings that was normal wear and tear becomes excessive wear and tear.
Wish me luck!
• No way you leased it for 200 per month with nothing down unless maybe it was a very low mileage lease less than 10k per year. It just didn’t happen.
• Probably a mitsubishi mirage, chevy aveo or nissan versa. All coffins on wheels.
● I too lease exclusively now. We’ve had 7 cars and SUV’s in the last 10 years. We had always purchased new cars until the leases started making more sense. My wife and I are both 60 and we want the comfort, technology and reliability that comes with new cars. If anything goes wrong they come to us and fix it.
• The leases don’t make more sense financially but totally understand the hassle free part of it. If money isn’t a concern , leasing is great and trouble free usually. But it is never a good financial decision!
• It’s a very good financial decision. I’ve done it both ways for the past 50 years and I’ve always come out ahead leasing over buying. You need to stay under the allotted mileage, usually 12k per year, treat the car like you own it with routine maintenance( usually only oil changes and tire rotation), cleaning regularly, etc. As long as you get the lease payment around 1% of the sticker price, nothing down and have taxes and fees included, you will always have a new, RELIABLE, hassle free car under warranty at a reasonable cost. I know the shade tree mechanics like to constantly brag about putting several hundred thousand miles on vehicles and say how smart they are going that route, but for me having a hassle free reliable car makes more sense financially and for peace of mind. As I pass cars broken down on the side of the road I am thankful that has not happened to me for over thirty years, ever since I started leasing vehicles instead of owning them. Remember, 0 down, around 1% of sticker price for monthly payments, taxes and fees included, I have always been able to bargain deals like that every time I lease.
● What about the fact that insurance for a leased car is higher? Does it still come out to a cheaper amount?
•Insurance is the exact cost for leased or owned.
• If you finance your new car, you will have to get liability, collision and comprehensive coverage until the car is paid off, so the insurance cost is the same until then. You’ll only save on insurance, if you buy the car with full payment or if your car is paid off, then change the insurance coverage.
But, again, by the time you pay off your car, your car will have depreciated in value and will likely start to need more repairs done.
• Sometimes keeping a beater on full coverage isn’t bad. Twenty five years ago I bought a high mileage 86 mustang gt for $1,200 It was in rough shape but a fun beater. Anyway,the car got stolen eight months later and totaled. The insurance payout was $1,900.
• As someone who has driven for 55 years and never had a car stolen, I don’t think this tip offers much for me.
• In reality it doesn’t do anything for me either. I have money. I don’t need to purchase a $1,200 car. I was relating my experience,nothing more.
● I paid cash for a 2007 Lexus that was 3 years old. With 22k miles. Cost was $22k. Paid another $2300 for an extended warranty. Aside from oil and wipers, I have had brakes done once. A few recalls and repairs that were covered either under warranty or recalls. I spent $1000 on a paint job 3 years ago. I just went over the 100k miles on this car, everything still works great. Now adding all this up and dividing by 10 years my cost are $276 a year. I got Luckey, it still runs and aside for some back seat upholstery issues looks great. Gets me from a to b and then some.
• So much of your “luck”has to do with the brand of car you chose. Good one.
• Missed a 0. $2760 per year sounds more like it.
• Excellent car(TOYOTA)✅️❤️☺️👏
● Very well put. You are the perfect lease customer. I am sure your off-lease vehicle is turned-in within the mileage range by contract. The lease company get back a nice vehicle they can sell for a profit or possible re-lease, everyone wins. I only wish that this was rule instead of the exception. In most off-lease vehicles the vehicles have excess mileage beyond the lease terms and the vehicle has all sorts of damage. In some cases, accident damage that was repaired in a sub-standard manner. All this lowers the value of the leased vehicle and this equals a loss to lessee and lessor. Sadly, this gives vehicle leasing a bad name.
● The Buy argument comes with some conditions. I purchase a previously owned vehicle in the model, body style, and color I like. I keep it in good condition for 2–3 years. Including all extras, my annual cost of ownership is around $2k.
● The average American lease payment is much higher than the 200–300. More like double that- which is why most people find leading more of a luxury financially.
● Another benefit to leasing, is you don’t take on the full tax hit of a vehicle. You only pay the tax on the payments. If you finance you take on the full tax hit up front. If you sell the car, let’s say 4 years later, you only get a break if you trade it against a new car and trade ins never get the best value - compared to a private sale. Basically the way I look at it is what are the financial rates for leasing and financing. Then are you a high mileage driver (if higher than a lease offers then you may want to re-think a lease). Leasing has become much more competitive and can be a better option to financing.
• sure. vs. financing. most of us who say no to lease are buying a car outright (or financing for less than a year) and holding a reliable car for decades. if you are turning over cars often whether you lease, buy or finance it is an expensive approach. and they are not reliable brands think as low as Kia to as high as BMWs it will always be an issue. And that is the same for any purchase.
● 100% true. I never understood the passion some people have around buying used cars to save money. I have zero interest in dealing with maintenance on an older car. It is time consuming and expensive.
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