lease or buy your car

Should You Lease or Buy Your Car? Which is Right?

It is a very common question: Should you lease or buy your car?

Leasing new cars is on the rise.

The amount of people leasing their automobiles is on the rise. 34% of all drivers in the market for a car are choosing to lease instead of purchase their next set of wheels. Five years ago that number was only 12%.

An executive with Kelley Blue Book told the Los Angeles Times, “There’s an undeniably increasing sense that, just like how a TV or computer becomes obsolete relatively quickly, that’s happening with cars too.”

People want to toss their “old” cell phone after a year or two and so it seems that attitude has found its way to the car lot.

Whatever the reason – technology, maintenance costs, monthly cost savings – increasing the number of leased cars on the road to over 4 million, the question you want to answer is, “Is it right for you and your family?”

How do you know if you should lease or buy your car?

Here are a few things to consider:

1. Whether you lease or buy a car, it is not right or wrong

This decision is a personal choice. It’s kind of like a home. Do you own or rent your home?  It is a personal choice. There are pro’s and con’s for each solution. The same is true with a car lease or purchase.

In fact, at our house, we have one of each. We reap the benefits of each scenario. We have one leased car and one car we purchased.

2. When should you lease?

There are several advantages to leasing. A leased payment as opposed to a financed payment is 23% less on average.  So we see a huge group of millennials choosing to lease because their payment is less. A car payment is a lot of money if it is their first job and they are commuting and starting a family and finding a house.

Also, leasing makes sense if you are someone who enjoys having a new or newish car. I (Scott) love cars!  Every 3-5 years I get an itch for a new car.  It’s what I do. It’s who I am!  So, the best thing for me to do is lease because if I buy a car and sell it within 3-5 years I am not going to get the money back out of it.  So leasing makes sense for me.

Another good time to consider a lease is if you own your own small business. A lot of business owners, like us, like to lease cars because it is a good tax decision to do so.  You can write off all the payments, not just the miles.

We have a dedicated business car and a “kid car”.  Our Chevy Tahoe is our “kid car”.  We put 25k miles on it a year.  With our leased business car, we don’t, and we wouldn’t want to, try and put that kind of miles on a leased car

3. When should you not lease?

Penalties and fine print are one reason not to lease a car. One of the things you have to be very aware of is mileage.

“Watch the miles, watch the miles, watch the miles.” When you lease a car you get it at 10, 12.5, 15 or 20 thousand miles.  The more miles you buy, the higher the payment. But, the average mile overage fee is 20 cents a mile, which adds up quickly. If you go 1,000 miles over what they allotted you, it’s another $200. Watch those miles!

There is a bit of risk in leasing if for some reason your situation changes and you can’t afford to make the payments. There is usually no clean way out of a lease contract. You might be required to make all the remaining payments and fork over an early-termination penalty.

So it pays to consider your current financial position and speculate, as well as anyone can, how your next several years may look monetarily.

Lease or buy, you need to agree.

Either way, there is no right answer. But there is a wrong way to make the decision. And that’s without consulting your spouse.

Make sure you are on the same page!

We have this couple right now that are in a fight over this.  The husband came home with a new car and said, “Look honey.” She loved the look of the shiny new car until she found out he leased it. His defense, “I leased it, no big deal!”

She said, “I don’t believe in car leases. I don’t think you should either.” And so now they are arguing about it. (I think I’d avoid long car trips in it–imagine the tension.)

So, most of all, make sure you and your spouse are on the same page about whether to lease or buy. Or be like us. One of each is the best way for us to go.

A car is not worth a fight or making your spouse feel he or she is not included in a major purchase decision. Tension over an automobile is worse than four flat tires. Avoid both at all costs.

Have great advice about leasing or buying your favorite car to share? Leave them below!

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Click below to watch The Money Couple discuss leasing vs. buying with the hosts of Denver’s Everyday Show.


6 thoughts to “Should You Lease or Buy Your Car? Which is Right?

  • Jason Jorgenson

    This article is based on the premise that no matter what you’re going to have car debt of some kind, either a lease or a payment form a loan. Personally, at the beginning of the article should be a paragraph stating that the average payment for vehicles is around $500 a month, and that leasing or loaning a car either way is the worst financial decision you can make. Take a $500 car payment a month and place it in a good IRA instead and it will make over a million dollars in about a decade.

    Then title the article: “Which is less stupid, Fleecing(leasing) or payments?”

    Tax write offs aside even, owning a car is the way to financial freedom and wealth. If your goal is to be wealthy, not just look wealthy, I recommend the book “the millionaire next door” if you want to see how millionaires truly live and act. Hope that helps people, obviously this is an area of financial fitness that I have strong feelings about.

    • The Money Couple

      Thank you for your feedback. Yes you do have strong feeling about – love it! Thanks!!

  • Jack

    You made a statement that if you trade every 3-5 years, you wont get the money back out of it. The trick, it seems, is figuring out if you can get more than the residual value in the lease. If you can afford the higher payments and you think you can get more than the residual value vs what you make in lease payments, you should buy. Often times leases seem to be based on the MSRP less the residual plus interest. Watch the difference and the interest built into the lease.

    • The Money Couple

      Thank you for your feedback Jack!

  • Linda

    Great article. I wonder about the difference in insurance rates for a lease vs buy decision, and if that difference eats away at some of the savings in monthly cash flow for a leased vehicle?

    • The Money Couple

      Thank you for your feedback. Insurance companies rate based on a variety of factor. However, how you purchased your car is not one of them. So that doesn’t need to be one of your deciding factors!!


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