Leasing vs buying a car: which one is better? Do you lease or own a car?

[Uptowngirl88]

Lease

Buy

[zeitgeist057]

I would never lease, and I would also never buy a vehicle new, or even less than 3 years old.

As you can see from the above chart, a $25,000 vehicle is worth less than $15,000 at the three year old mark. Buying new is throwing money away. Leasing is also throwing money away. If I had to choose one or the other, I would lease, since it's a smaller commitment. But the best option is to buy a used vehicle, one that is over 5 years old, and really around the 10 year mark is best.

Some of my vehicles over the past 10 years:

2007 Honda 600 CBRR - paid $4000, sold for $4500. +$500
2005 Yamaha V-Star 650 - paid $3000, sold $2800. ($200)
2006 Toyota 22R - paid $5000, sold $5000. (even)
2005 Ford F150- bought for $4500, sold for $3000. ($1500)
2001 Ford Ranger - paid $3300, still own
2006 Yamaha V-Star 1100 - paid $3500, still own
2017 Yamaha R3 - paid $2500, still own

Over the last 10 years, I've had a few different vehicles, no major issues. My total losses/costs have been $1200 on what I bought and sold, and I paid $9300 for the vehicles still in my possession, which I would value/estimate sales return at over $7,000 if I wanted to liquidate them. So, roughly $3,500 in costs.

Compare that to if I purchased a 2011 Toyota Tacoma in 2011, I would have lost about 50% of my original purchase price, or around $10,000, depending on the model.

Another factor in this equation is what I do with the money I save. If I take that $6,500 in savings (or actually $16,000 that I didn't spend when I bought a motorcycle for $3000), and invest it for 10 years at an average interest rate of 8%, compounded yearly:

$16,000 becomes $34,542
$6,500 becomes $14,033

Yet another reason buying a new car or leasing is throwing away money. Instead of appreciating and growing, the money you invest depreciates, and rapidly.

[midnightmoon05]

I do the same, but don’t have the math brain like you.

[Rob17792]

that 8% is quite unrealistic not even the s&p 500 has been able to do 8% every single year and i'm not even sure warren buffet himself does 8% every single year. a more realistic view would be 4% or even 2%

[zeitgeist057]

@Rob17792 Here are a few actual examples to show you the reality of investing. I didn't suggest that every or any investment will return 8% "every single year", that would be a silly claim. But on average, over a period of 10 years, many (including the S&P) will do at least that well. In fact, since you mentioned the S&P, it has had a 112% return the last 5 years, and a 386% return averaged over the last 10 years. So if you were to have invested in the S&P in the scenario I gave, rather than a more modest estimate of 8% return (simple calculation, no compounding, so lower than actual return):
$16,000 becomes $61,853
$6,500 becomes $25,127

T Rowe Price Target Retirement 2040 fund, which has a > 10% averaged return since it's inception in 2002, and over 12% averaged return the last years: www.troweprice.com/.../TRRDX

This is one example of MANY that show that 8% is actually a very reasonable and achievable ROI.

[horatiohornblower]

Monthly payments. The last time I made a monthly payment was when I was 19. Straight cash is the way to go. Save your money. Get a 2-3 year old off lease car. Keep it well maintained. Then dump it after five or six years. You'll always have a good car. Rare mechanical issues and won't spend huge sums of money in the long run.

Knowing how to fix your car is a huge plus. All I can't really do is rebuild the transmission or engine. Most anything else I can swap out. I guess it was good my first car was a non-running junker. Which I had to fix up myself to have a reliable and nice looking vehicle.

[Uptowngirl88]

I'm confused. What do you mean get a 2-3 year old car off lease? Then you say you made your last monthly payment at 19. Leased cars are ongoing payments

[horatiohornblower]

Buy a used car which the previous owner leased. Those are usually pretty low mileage, good condition and had all their maintenance done on time at authorized service centers. To comply with lease terms and avoid penalties.

[Uptowngirl88]

Ahhh gotcha makes sense. I didn't know you could specifically ask for a previously leased car to buy

[horatiohornblower]

You can specifically search for it. But I'd expect a used 2-3 year old car with low mileage to be off lease. It doesn't really matter to me that it is specifically off lease. It could be certified pre-owned for all I care. There's just usually a big discount for those nearly new cars and the depreciation after using it another five to six years is much less than the depreciation of a brand new car.

The driving experience is nearly identical. You just have to live with knowing it isn't brand new. The lightly used car also has the benefit of time for model defects to show up. So, you can see if there are any recalls or consumer alerts about the model.

[dustybiker]

Twelve years ago I leased my truck through to a purchase agreement a couple years later. It was the deal offered at the time making it a better choice. Dealerships often have offers/specials for either or.
I heard right now is a really good time to get a vehicle. The “drive off the lot” value is currently much much higher than people ever remember it being.

[douride2]

I got talked into a lease once. It was great till the lease was up. Drop off the vehicle & I had nothing after 3 years of paying. Then I had to start over with nothing no trade just my own money down.

[ChrisMaster69]

There is no real answer, as it greatly depends on each individual.

for example a 20k car

if you buy it cash and sell it after 4 years, it’s probably worth 10k.

over that 4 years you had to save 10k

you then buy another 20k car and repeat.

every time you need to save to make difference between trade in value and car you are buying. That needs to be money you save.

leasing means you likely pay out 200 a month for 4 years is nearly 10k

PCP means a lower cash payment and final balloon.

this greatly depends on market value at end of 4 year period.

a car is a depreciating bit of metal, there is no really sensible way of owning one.

buying outright gives peace of mind if you lose your job

[MJtheCoach]

The best advice I could give you is depending how much you have but I would pay between two to $5000 maximum on a car you could get a Lot of decent cars for $5000 if your budget is less you could still get a good car for $2000 I remember I bought a car for $500 I put $200 into it and next year I sold it for $500.


cars are the biggest waste of money I learned that from my late teens spending a lot of money on a piece of shit car

[Uptowngirl88]

Right mine was13,000. 2017 low mileage of 8,000 upon purchase

[MJtheCoach]

Yah that’s it! Used cards are the best. Pay one time and they’re used. In 4 sell it for 20% of the cost. Didn’t close much

[slatyb]

I leased but there’s no definite answer. Either could be better. Leasing is like buying part of the car... the depreciation over the lease term. At the end of the lease you can decide to buy the rest of the car or not. There is an interest rate on a lease just as there is on a loan to purchase. A loan to purchase is simpler, and it’s easy to compare them. Leases are more complex as there are charges for excess mileage and the amount financed may very.

[Massageman]

Especially now, buy and keep at least 6 years. That would be 2-3 cycles of leasing.
The one exception MIGHT be a vehicle used ONLY for business. You'd have to run a couple of "what if" scenarios to figure out your breakeven point on the lease vs buy decision.

[TheBigGuy9]

No doubt buying a car is better. It’s the same as renting a house vs buying a house.

[TheBigGuy9]

That’s not what I was talking about. I was talking in relation to money.

[Rob17792]

@thebigguy9 f_ckjoebiden is right. owning a car is the stupidest move anybody can make. i learned that in my 20's. the amount of money i would had spent on a car i invested in bonds cds and silver. if you need a car then lease one otherwise don't bother. as far as buying a home vs renting im struggling trying to buy my first home. there have been many things that have gone against me so far especially these real estate multibillion dollar prick companies and property management companies buying and selling amongst themselves for a 10% roi and then rent gouging to tenants. but yet the government doesn't want to step in and end these illegal business practices

[TheBigGuy9]

So having a monthly payment on a car you never own, plus full coverage insurance, etc is better than buying a car in 2005 and still driving it as your beater today?
Yeah, well I live in the suburbs and I need a car for work. I’ve had the same work car for 16 years. It was paid off in 3.5 years. It’s mine and it’s reliable. I have investments. I own house too.

The question was is leasing better vs buying. Very few will tell you leasing is better.

[Uptowngirl88]

@Rob17792 huh? So you want to pay car note payments all your life instead of just buying used car that's 3 years old. Then pay it off and not have car not payments for the next 20 years? You waste a lot of money

[Uptowngirl88]

@thebigguy9 right that's just crazy to me lol

[f_ckjoebiden]

A 3 year old car lasting 20 years? Maybe if you live in the south, drive like a grandma and average 5 miles a day.

[Uptowngirl88]

@f_ckjoebiden incorrect you sound inexperienced and incompetent

[TheBigGuy9]

@f_ckjoebiden I bought my car new. Hence why mine has lasted 16 years and counting. I average about 12,000 miles a year. A 3 year old car can certainly last that long as long as you keep up with maintenance. It’s amazing how many people don’t change their oil on time. Flushing your tranny fluid every 50k miles. Having a good mechanic look at it every year. The only thing I’ve had to fix on my car is manufacturer defects. The water pump twice. Wheel bearings. That’s it.

[f_ckjoebiden]

I get it, but 23 years of road salt, ain't happening, or potential to splatter medium sized game. Still need to live in the right area, drive like a grandma etc...

[TheBigGuy9]

I detail cars normally in the spring-fall time. When I was younger, I’d be detailing it every day after or before work even if it was just dust. I got a lot of action from it lol.
I put a coating on the bottom of my car. To this day I have zero rust on my car. But as I said 16 years. It is possible to keep a car rust free from the time you bought it. All it takes is work.

[TheBigGuy9]

@Uptowngirl88 how about an accept and follow? Gym talk.

[ohboyohboy76]

I've always been on the "buy" side of this. But I get bored of cars quickly. If you know you're going to want a new car in less than five years or so, leasing may make more sense. It depends on your situation in other ways too.

[HighValue]

People that get bored and want a new vehicle every 2 or 3 years are better off leasing.

People that like to keep their vehicle for a long time are better off purchasing it.

[TommyMountainFigure]

Leasing is fine if you always want to drive something nice and new. Buying is for those people who get very attached to a vehicle.

[TommyMountainFigure]

I have done both. I prefer to buy

[Rob17792]

not me i'm the exact opposite to many headaches with buying and not worth it. better off leasing and getting rid of it after 2 or 3 years

[TommyMountainFigure]

@Rob17792 I agree it suits a lot of people but I like to make modifications to my cars. can't do that with a lease.

[Rob17792]

oh well in that case then yeah you'd obviously want to buy but as a general rule i prefer to just lease

[Subarugirl]

Depends on your financial situation. I lease my car from the dealership that I work at and I pay less than 200 a month on a car that is less than 3 years old.

[Rob17792]

which is actually really smart. i would never buy a car again they only depreciate in value. you're much better off leasing. that way when it starts to run at that 60000+ miles and more serious repairs are needed you can wash your hands of the car and trade it in for another one with no money down if you have to

[f_ckjoebiden]

There is some word for leasing, if it turns into a rust bucket sooner than you can get miles out of it, or you are rich. Most douches own to much on borrowed credit anyhow, they may as well lease it.

[Jay3344]

I don’t live in an area with easy public transportation. I bought a hybrid with a loan from the car company which offered 0% apr for the entire loan. Too good an opportunity not to buy.

[jasco]

The only reasons i may ever rent a car is because my current car is no good, I am in another country and my car can't come with me, or i just wanna travel in style. Otherwise I am buying

[Morgador]

Myself I buy all my vehicles and when I get a new one if I'm not going to keep it I give it to a family member who needs one. If your going to keep it a year or two I guess leasing would be good

[DCooper]

I like to drive 40-something old cars, leasing isn't really an option.

[t-8900]

Buy but I think my next is going to be used. I no longer really see a point in buying new tbh.

[Razp_Sorbet]

Leasing cars isn't really a thing here. I own my car. Bought it second hand earlier this year

[Soleil8000]

I own, but it only makes sense when people don't sabotage it for you (basically only for small/cheap/non descript) cars.

[Brainiac25]

Also, if you drive over allowed mileage, you will be penalized.

[Bklynbadboy12]

Well I own me cars cause leasing it like renting a car and then you have to give it back not they have your and you still have no car

[LegendaryIcon]

I own mine. It's used, and it's fairly old. Pretty good though, just a little beat up