The Car Lease – The Devastating Costs of Luxury

Hero

I launched FinanceSuperhero in April 2016 to help others save money, get out of debt, earn more money, and live the best life possible. Send me an e-mail or a comment if I can help you in your journey. Thanks for reading!

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13 Responses

  1. Beth says:

    I’ve never leased and never plan to!! I love the way you broke this down. I hate the fact that I have a dang car payment but at least I’ll own it once paid off. And I’m gonna drive it as long as I freaking can.
    What would you advise to do if someone needs a car but has absolutely no money to outright buy one or put money down on either??

    • Hero says:

      Thanks for stopping by, Beth. You pose a great question. I would advise a person in the situation you described to get creative and scrape together enough money to purchase an inexpensive beater car – something simple that gets you from point A to point B. Whether that means working overtime, selling things, or delivering pizzas, it can be done with persistence. From there, gradual, periodic upgrades are appropriate, say every 6 months.

      Keep in mind, this is what I would recommend to a person who desperately wants to win financially. I would never stand in the way of an adult choosing to take out a small, reasonable loan to purchase a basic vehicle. But I would certainly attempt to dissuade anyone who was considering a vehicle lease, as it has been proven, time and time again, to be the most expensive way to operate a vehicle.

  2. I think your analysis somewhat misses the point. The financial decision of driving around in a brand new A8 is not a buy vs lease argument. It would be just as poor of a financial decision to buy an 80k car as it is to lease an 80k car. The key when leasing is to first negotiate the price of the vehicle then figure out whether it makes more sense to buy or lease. Believe it or not there are plenty of instances where you are better of leasing a vehicle rather than buying new.

    • Hero says:

      Thanks for stopping by and sharing your thoughts, Frugal Familia. I see what you are saying.

      From my perspective, the primary financial decision that lies in the buy vs. lease debate is cost effectiveness. While most financial experts argue that a car lease is the most expensive way to operate a vehicle (for example – http://www.consumerreports.org/cro/news/2011/04/resurgence-of-car-leasing-may-not-be-good-thing/index.htm), I can see instances in which buying a brand new vehicle is equally bad or even worse.

      As I suggested in my analysis, the best course of action, in my opinion, is operating quality used vehicles without a monthly payment, developing a sinking fund to replace this vehicle when the time comes, and avoiding the generally devastating financial hits of interest and depreciation.

  3. Jacq says:

    My coworker’s AC has been broken. Rather than fix it, (a few thousand dollars at most?), she decided she wanted a new car. That was all the hullabaloo Wed morning, her talking about it and then finally taking people outside to see it. It was not brand new, low milage but she still had to finance it. And she just moved into a new place. *shrug *
    I would only lease if I had a definite short term job somewhere it didn’t make sense to bring my car or buy one. For example my last company asked if anyone would consider going to Europe for 1-2 years to work with / train others / learn from them. Depending on where, and taxes to buy & resell, I would consider a lease.

    • Hero says:

      That’s a situation I hadn’t considered, Jacq. If I were going to be working abroad for a short term, I would probably try to utilize public transportation before leasing a car, if possible, but I could see some scenarios in which that might make sense. Thanks for sharing!

  4. Corvette Lover says:

    Unfortunately, I am forced to lease. My wife works for one of the Big 3 and part of her contract states that we must buy or lease a vehicle every 3 years for her to get her completely free of any cost company car. After doing the math it makes no sense to buy a car while we are under this arrangement.

    Otherwise, I agree with most of your argument though I would say that sometimes leasing is a good option for some people.

  5. FPF says:

    I’ve never leased or financed a car before. I drive a 14 year old car, which I bought new (before I knew any better – but at least I’ve gotten my money’s worth out of it). My wife drives a 7 year old car that we bought used and paid cash for, and we also have a beater (1991) pickup truck that we bought used and paid cash for. We have zero interest in driving new/flashy cars. As long as they get us where we need to go and/or hauls the firewood, we’re set.
    On the other hand, I have friends who just leased two brand new vehicles. I hope they eventually realize the error of their ways, but I suspect that their 65 year old selves will be doing some butt kicking down the road!

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