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Should You Lease Or Purchase A Car?

By Erik Folgate

If you are wondering if you should lease or purchase a car, here is a link to a decent calculator to help you make the decision.

Calculator: Lease vs. Purchase a Car

What Would A Money Crasher Do? If you choose to follow the 11 principles of a Money Crasher, you would never consider leasing a car. I don’t think it’s ever worth it, because there are a lot of fees and if you end up buying it at the end of the lease, you’ll spend more money than if you had purchased it in the first place. I’ve read a bunch of articles about the justification of purchasing a new car rather than a used car. I don’t buy it. I’d buy a two or three year old car any day over a new car, because someone else broke it in and took a bunch of depreciation with them.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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Comments

  • john

    I totally agree with you. The only perk of a lease is that you can have a new car every two years and look really trendy…if youre into that sort of thing. Or maybe you are a real car buff and like the feel and smell of new things. But you’re right, lease and lose.

  • http://thewealthhunter.com Bill@thewealthhunter

    This is always an important question when you’re thinking about getting a car. I’ve bought new and used cars, and I’ve also leased. So, here’s my take on the answer.

    If you’re thinking about buying a new car, I would strongly consider leasing it.

    Why? Well, I look at leasing as a “3-year Test Drive.” You basically test the car out for up to 3 years and then you can decide of you want to “Buy” it.

    If you bought the car out-right from the beginning, you’d be stuck with a car that you might want to sell. And if you’ve ever tried to sell a car, you know that you’ll never get close to the retail price. So, if you lease, you only pay for the time you’ve used the car. Then get rid of it (instead of selling it) at the end of the lease. I know that people think that the money that they’d get “selling” a car goes into their pocket, but in reality it just goes to pay off their outstanding car loan.

    The other big benefit of leasing is no down payment. Yeah, I know that car dealers ask for a down payment so your monthly payments will be “lower”, but the idea of a lease is to put as little money out of your pocket as possible. So, don’t fall for the salesman pressure – insist on no down payment.

    That’s my take. Thanks for the article.
    Bill
    thewealthhunter.com

  • george

    We have two cars, 4 kids. I commute a long way to work, so I have a 6 year old honda that I will drive into the ground. We lease a new car (SUV) for the wife and kids so that they always have a new, nice, no maintenance-required car to drive around. I am too far away during the day if something were to happen and leave them stranded, so I like the added security of a new car for her. I also like that we have one nice car for the family to go places in. Since I want one relatively new car for the wife at all times, leasing beats buying and trading in every few years. ANd the cost of leasing two SUVs over the last 6 years Was about the same cost as buying one and keeping it those 6 years – I did the math. so to say you should NEVER lease is inaccurate. There are legitimate reasons to do so, that are separate from strictly financial, and if you do it right, will not cost much more than buying. Yes I know the frugal argument is to buy a 2 year old car and drive it into the ground, but for us, this makes more sense on other grounds.

    • Mike

      do me a favor and publish your math – I dont see how a lease (especially when maintenance is not included) is better than buying it.

      For a 2010 Honda Odyssey LX I can buy it for $ 23,675 from USAA buying services which will be a monthly payment of $ 394.58 per month assuming I have a 0% loan from the dealer for 60 months – keeping the match simple.

      To lease it at $ 259 a month for 36 months I pay $ 9,324 and then it has a $ 15,850 purchase option for a total of $ 25,174

      Buying it is $ 1,499 less expensive. Plus at the end of the lease if I want to buy that car and have it paid off in 5 years like I did if I had purchased it I would need to pay $ 660.41 a month for 24 months to own it in the same amount of time.

  • Tim S

    here are some things to consider when leasing and In fact I have never leased a car again because of these, Most of this stuff i found out when i went to turn in the car.

    1. 12,000 miles a year sucks, you get 32 miles a day max, and you spend more time watching the odometer than the road. Road trips on weekends all of a sudden become something you avoid.

    2. If your leased car has v rated tires on it your probably going to have to put new rubber on the car before you turn it in and then someone else gets to enjoy the new rubber you just paid 600$ dollars very irritating. If you turn the car in with worn out tires you be forced to pay for it.

    3. Everyday life is never constant. If you get laid off and then a get a new job and its 45 miles away you just completely blew your 12000 mile a year limit and you are now paying for miles. which can add up to be huge money.

    4. you Can’t have dents or dings, or chips in paint either all will get fined on the turn it.

    5. I don’t like having car payments forever and ever and ever and ever.

    For most people leasing my work which is great. but for me the leasing experience just completly turned me off to it totally.

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