Buying vs. Leasing a Car (Pros and Cons)

In this video I discuss whether you should buy or lease a car. So which is the better option? The truth is that there are two aspects to this decision.

There is the mathematical decision, and the personal situation decision. Some people like to drive new cars every three years, so they think it's better to lease a car. Some people like to drive cars longer than those three years and take care of their vehicle, so buying a car may be a better option for them.

Leasing a car is generally better if you're the type of person who likes new cars every three years. There are pros and cons to leasing a car vs buying a car. Some of those Pros is that you know you'll have a modern vehicle with all the updated amenities. However there are also some restrictions when leasing a car that you should be aware of.

Buying a car is generally the better option if you were someone who likes to hold on to their vehicles and likes the repair and work on them yourself. if you hold on to your vehicles for five or more years, it usually makes all the sense in the world to buy it and drive it into the ground. The person who owns their car can also sell their car at the end of ownership allowing them to recover some value of the vehicle. You can't do this if you lease your car.

Watch the entire video to find out if you should buy or lease your car!

Sources:
It was easiest to use the numbers from the Khan Academy video below because there are SO many different situations when it comes to Buying vs. Leasing a car that CANNOT be covered in one video. There are so many different makes, models, and manufacturer incentives that change over time. I decided to stick to a general overview for this video, along with my personal opinion at the end. For the original numbers please see the link below. Thanks again for watching! :)

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My mission is to provide my viewers with actionable content that enables them to create financial wealth. My videos are a reflection of my real-world experience as a real estate investor, stock market investor, student of finance, and entrepreneur.

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[lonewolf]

No you're not rambling I appreciate the information you're giving us I wish they taught us this stuff in school along with real law

[pimpnorris]

Do you have consistent income? Do you like having a new car every 2-3 years? Do you not mind having a car payment of about $400-500 a month (minus insurance)? Do you not drive much or live close to your job? Do you like the piece of mind that if something weird happens to your car, about 95% of the time, you will not be responsible for it? If yes, then leasing might be for you!

Do you have limited income, are you car savvy or know a mechanic, do not care for a new car all the time, don't mind getting a used car with a payment of about $200-400 a month, and want the peace of mind knowing you can do whatever you want with the car? Then buying is for you!

[SeedOfSins]

Real life scenario, my friend and I got the same truck, same day, same price.

He financed over 7 years with a down payment of $1, 500. At a payment of $256 biweekly. For a total price of $48, 000 over the 7 year term.

I leased 3 years with a down payment of $2k. At a payment of $141 biweekly. After 7 years I will have paid $31, 660 for leasing 3 trucks.

His truck might still be worth around $10k after 7 years that he sells.
So he paid $38, 000 + the possible cost of repairs and maintenance. (Excluding oil changes)

Where as I paid $31, 660, drove 3 brand new trucks and had $0 in possible repairs and maintenance.

[spoonerdee]

From the number 1 BMW salesman in the country (yes he was awarded that title more than once) he stated "Buy used, lease new"

[ravenskyhalo]

While I completely agree with you in the case of this type of car - a sub-compact at $17, 700 - leasing can end up being the better choice for certain situations. Particularly with some luxury cars or high end trucks, where you're going to be hit with much greater depreciation rate and more expensive repairs when it's out of warranty. You also face certain risks in ownership that you don't in leasing, such as the diminished value you'll get from your car if you get in an accident at some point (even if the damage is repaired) or if the car turns out to be a lemon. And depending on your personal cash flow and/or how actively you invest, the value of the lower monthly payments in lease and having more liquid cash on-hand also shouldn't be ignored when considering options.

[dnielrable]

Things were missed which are pros to leasing and extra cost to owners:
- paying insurance
- paying we call casco(insurance in case you caused trouble)
- changing tires
- providing spare cars in case there is problem with the car.
- in case of accident, they will take care of the lawful actions
- paying mandatory service session are included

[Brigh]

Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly

[SunsetSheen]

Excellent video. One other thing to consider is the opportunity cost of the difference in money spent on purchasing vs leasing ($465 - $159 = $306/mo). Provided you return the car after the lease term ends, that’s a difference of $11, 016 over 36 mos. True, you are forfeiting any equity in that car and were essentially just “renting” it for 3 years. However, you did likely get a lot of utility out of it, so that saying of flushing money down the drain that a lot of people parrot mindlessly isn’t entirely accurate.
Putting that $11k to use on an investment or side hustle will likely generate far better returns (both monetarily and in terms of educating you), than the relatively nominal difference that would have been saved by purchasing over leasing then buying the car out ($1, 184).
Either lease a car to keep your monthly overhead low, return it when the term is over, and reinvest the difference into an asset that kicks off cashflow. OR buy a pre-owned car that’s 2-3 yrs old and has already depreciated substantially at someone else’s expense.
Purchasing a brand new car is one of the worst investments a person can make. You’re buying a depreciating product which consumes a large chunk of your monthly income that you have to pay out of pocket to maintain. Buy used or lease new.

[MusicLover-srwr]

I’m trying to scroll down through comments for opinions on which one is better to lease or to buy. It makes it hard to find one cos everyone is talking about the green marker 😩

[Jessicatorres_]

"Having recently gained more knowledge about personal finance, I've subscribed to your channel. I want to commend everyone who's tirelessly working to earn a living while also building wealth during this recession. At 45, I'm retired, along with my 51-year-old husband, and we're debt-free. Our plan is to relocate to Thailand. Thanks to our frugal and financially savvy lifestyle, as well as our commitment to saving and investing in the financial market, we've been able to generate passive income even in this recessionary period, allowing us to sustain our desired lifestyle."

[Pip.]

Now it made me think to lease instead of buy. I want to change my car every 3 years and I want to get rid of those costly maintenance fees when the car reached at least 5 years. Watching in 2020. Thanks for this very informative topic. Your voice sounds very pleasant to listen to.

[jamslam]

I've done both. Basically, if you like to drive a new car every 3-5 years, go with the lease. If you keep your car until the wheels fall off, then buy. Leasing does offer some advantages over 1) You can transfer the contract to anyone else. 2) You can drive a luxury car at an economy car payment. 3) You pay sales tax on the payment and not the entire vehicle. 4) You don't have to worry about trade-in value, just turn in the keys. Of course there's also downsides such as needing to carrying higher insurance limits, mileage limits, GAP insurance and fees like bank & disposition fees.

[madjackgamingandfitness]

Argued with my ex about this. Well theres a reason shes an ex, and a reason shes always broke.

[WhoDatizz]

I like to lease my car because I like luxury cars with the latest technology, body style, and very little maintenance. I also enjoy the way new cars drives versus broken in used cars. I negotiate the extra warranty and gap coverage. I factor in the amount of road trips I take a year into my mielage allowance. In three years I look forward to experiencing my next new car.

[suprman]

I've owned and leased cars and it is a no brainer to me that leasing is better.
+ Car insurance costs are the same whether you are leasing or owning the same vehicle (unless of course the vehicle is paid off).
+ I've leased mini coopers, bmw's, mercedes and I've spent $0 on maintenance costs. I do not have to pay for tires, brakes,
oil changes, etc. So that is ALOT of money you are saving by leasing.
+ A car is not an investment, a house is. A car depreciates the moment you drive it off the lot and you will
be ripped off when it comes time to sell it. You will be ripped off when buying it as well for that matter.
+ I do agree that the best car payment is no payment but I treat cars the same way I treat iphones. Better ones come out
every year but that doesn't mean I want to get a new one every year. Every 3 years...yes. Which is why I lease.
+ Most people don't do 36 month ownership terms, especially families since its too expensive for multiple cars. They will pick anywhere from 60 to 72 months, which means you are stuck with that car payment. Where as leases give you the opportunity to reset and adjust after 36 months (24 months and 42 months are available as well.) So for someone that wants to save money,
leasing is better cause it gives you lower car payments, $0 maintenance costs and the opportunity to adjust after 3 years.
+ The downside of leasing is you have to pay for new registration every 3 years for each new vehicle.
+ Leases are awesome in that it can put you in your dream car. A $40, 000+ bmw would be a very expensive car payment. However when you lease you can make a much more manageable monthly payment ($399 a month) and then when it comes time to buy it, if you want you can for a much lower price ($22, 000) than if you bought it brand new.
In the end there is no right or wrong answer as this video fails to see. Whether it is better to lease or to buy is
an "opinion." My opinion is leasing is better. Stay safe!

[markjohnston]

I feel like there is one aspect missing: when buying for $459 vs. leasing at $159 for 3 years, what if you took the $300 you saved by leasing and invested it for the same 36 month period?

[Albert-vite]

Buy what appreciates.
Lease what depreciates.

[stjepanhauser]

Interesting, the stock market is currently experiencing a decline while bond yields are on the rise. However, there seems to be skepticism amongst investors regarding the Federal Reserve's plan to continue increasing interest rates until inflation is stabilized. As for myself, I find myself at a crossroads, uncertain whether to liquidate my $250, 000 stock portfolio. I'm seeking advice on the best strategy to capitalize on this current bear market.

[LindseyMHull]

I think it all depends on what works best for you, which is why it's nice to have videos show you both options like this! My very first car I ever had was gifted from my parents, but it was a beat up used car for $2, 000. It lasted me 3 years and I loved it. When that broke down I ended up financing a new Nissan with my dad as a co-signer because I drove a lot of miles to and from school, so I needed something reliable. What did I find out? Just because a car is new, does not mean it won't have issues. Now I'm negative in my car and can't wait to pay it off to get something different. Whether you decide to lease or finance, just do your research on the vehicle beforehand and make sure you really like it!

[boogienow]

I lease as often as I can. I always trade them in for a different car, always have a positive equity when I trade in. I like most people always have car payments. Mileage is never an issue since I always trade them in before the lease term ends. So, it's the benefit of low monthly payments, positive equity during the trade in. No maintenance cost, and new car every 3 years!