Should I Lease a Car?

With vehicle prices and interest rates at record levels, leasing may seem like a better option than buying... but is it?

Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson, AFC®
Directors: Katie Graham & Andrew Matthews
Written by: Andrew Matthews
Executive Producer: Amanda Fox
Produced by: Katie Graham
Edited & Animated by: Andrew Matthews
Fact checker: Yvonne McGreevy
Executive in Charge for PBS: Maribel Lopez
Director of Programming for PBS: Gabrielle Ewing
Assistant Director of Programming for PBS: John Campbell

Images by: Shutterstock
Music by: APM
Two Cents is produced by Spotzen for PBS

[kyle_throws_tools]

Another reminder as a mechanic- just because you can afford to purchase a car, doesn’t mean you can afford to own it. I come across a lot of Benz owners who can’t afford repairs. Maintenance costs can vary widely between different vehicles

[ago]

0% interest on a used car you own without payments is the best feeling rather than leasing

[damatar]

Back in the day, you used to watch out for balloon payments at the end of your car loan. You might pay $200/month for 4 years, then owe $2000 as your final payment. You would basically pay off the loan, then be screwed in the end and the dealership would repossess your car, which they could then resell. I think of leases as modern balloon payments. The "$4000 due at signing" being the up front balloon payment and after paying for 36 mos (or whatever the lease period is), you own nothing and the dealer can "resell" the car. They're always looking for ways to sell the same car twice.

[_sev]

I just skimped out of buying a car. I cycle to work, travel from city to city by train and use my cheap ass motorcycle tot go to obscure places far away. If I need to haul something I rent a van for a couple of hours.

[cdmsvt]

Woooowww you guys seriously have perfect timing!! I was seriously considering leasing a new vehicle asap as my company is putting in place a new return to office policy in September. Thank you for all the information! I especially liked the "Lets run the numbers" bit! You guys are amazing!!

[smartxalex]

I love the callback. It really highlights just how Philip has gone from looking the front man for a Weezer cover band to a front man for a Foo Fighters cover band.

[Chazz]

Very well balanced video. There is nothing wrong with owning a nice car, so long as you understand how much you are really paying and can afford it. If your financial goals/budget don't allow for it, don't.

[BN]

It really all depends on your use case. If you want something to get you from A to B and you plan on keeping it forever, then buying and financing a used car is probably the cheapest. With certain brands, it's better to just lease it because maintenance and repairs are crazy expensive. With EVs, you should definitely lease. If the battery dies, that will probably mean the car is totaled because the price to replace the battery can sometimes cost more than the price of the car. EVs also depreciate the most out of all other types of cars.

[MGC-]

My mom purchased a lease on a new car when I was in high school because she was tired of dealing with repairs, etc once she was done paying off the loan. She did all the math and made sure to account for the correct mileage (traveling to work, visiting relatives on holidays, etc) but we still ended up going over the allotted amount.

For the last year of the lease, my mom hardly drove the car and I wasn't allowed to use it because each additional mile was so expensive. We lived in the countryside (and this was before modern internet) so it was terrible. Essentially, for the last year of the lease, we were stuck in the house while "our" new car sat in the driveway.

Edit: The reason we went over our mileage limit is because we had a few family emergencies that required a lot of driving to different relatives' houses of whom lived out of state.

[NartheonlyWhal]

I'm lucky enough to both WFH and live in one of the only US cities with a good transit system. If I was suddenly carless, I could take months to save up / compare options / find a good used deal and it wouldn't cost me my job or quality of life. Most of the US is constructed to keep people trapped in expensive cycles of car buying/repairs - just a few days without transport and you can lose your job. We should push for better options for everyone!

[Blackmage]

As someone whose family owns a car dealership. I heavily recommend leasing a car since its good FOR US. 😅

[ChickenScissors]

Thank you so much for this episode! I've been dreadfully confused for the longest time why people lease cars. And when I'd ask them about it, they didn't have straight forward answers about whether you own it or not, and how repairs must be done

[TomMcMorrow]

I bought my girlfriend's car in cash when mine died. I'm allergic to interest payments!

[rodneyroque]

CPA here. If you finance a purchased vehicle, you deduct the loan interest and the vehicle depreciation (sometimes all at once in first year). Usually better tax benefit than lease payments.

[spiritfiend]

The US needs to wake up to the reality that car ownership is a money-sink that will only get worse over time between the cost of fuel, insurance, and maintenance. Rather than pushing the costs of participating in society to an individual person to own a car, we should be building infrastructure with affordable and reliable mass-transit for long distance and safe pedestrian/small vehicle paths for shorter distances. We can start moving in this direction by reclaiming local car lanes for smaller personal vehicles like scooters or e-bikes. This would not only help individual finances, but also start reversing emission trends that are cooking the planet.

[jamesvalery]

I love your videos so much. They take something quite complex and make it easy to digest. Thank you!

[Taylorocksocks]

I really appreciate y'all adding in the cost of repairs for this video. That's honestly something I was really curious about with your other video on buying a used car vs a newer car. Since the older a car gets the more you'll likely have to pay for expense repairs/maintenance. So I'm always curious how that fits into the equation as well.

[andreiroibu]

Interesting, but there is another point of view (actually my case now). Let’s say we invert the table on Ali and Michael, and they both want to buy a $20k car, but one is new, and maybe less well equipped, and the other one is approved used, but has about 4 years and 25k miles on board. For the lease, where I live, I would end up paying, say 300$ a month at 2.5-3.5% interest, while for the loan for the used car I would end up paying 600$ at 5-6% interest for the loan. If I take the value of the residual and divide it by the number of month I lease, deciding I want to keep the car, I can just put that in a savings account or something getting me a bit more, like money market, bonds, or if I feel adventurous, an index fund. Essentially, in this way and for this particular scenario, leading might end up cheaper than the loan, and I would be left with a car for maybe 3-4 years longer than if I would have bought used. But of course, everybody’s situation is different :-)

[earthling_parth]

I love the "Run the numbers" section. This, along with The Plain Bagel is one of my favorite financial YT channels ❤

[glennshoemake]

I remember driving around Florida in the 1990's and seeing the words "Lease" on the bottom of the license plate where normally the county name would go and you could easily tell who was leasing their cars. I'm pretty sure their is no Lease county in Florida.