Is it better to lease or purchase my car?
Ellis HammondPro Member
Investor · Leawood, KS · Member since 2017 · 178 posts · 108 votesIs it better to lease or purchase my car?
Most Popular Reply
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8yAlmost always the best decision is to buy a used car that’s 3-6 years old.
It depends what’s important to you. Investing, financial freedom etc or having nice stuff. It’s rare that you can have it all. I know people who are worth millions and they drive at best used cars or a used car that’s newer (think 3-5 years old).
I don’t know anyone who’s a millionaire who drives a Mercedes. Typically people who drive that type of car are high earners who have low net worths.
3 percent of luxury car owners in the US are millionaires. The biggest factor keeping Americans from building wealth is a car payment. There’s no equity in it.
End of my rant
127 Replies
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Originally posted by @Ellis Hammond:
@Matt K. @Joe Splitrock @Caleb Heimsoth @Twana Rasoul what if we weren’t talking luxury cars?
VW instead of BMW for example.
I realize luxury leasing is still a big expense but trying to see what makes sense for the avg American or maybe the average investor here on BP.
Seems like summary so far is buy used. Are you still financing that purchase? Depreciating it to close to zero?
Not all cars lease the same and it doesn't correlate w/ brand. For example, you can lease a Acura cheaper than a Honda... If you had say a limit of 250 you could get a wide range of vehicles... some good some bad but all under 250. You could even go lower, you could probably lease a new car for right around the 100/mo mark.
I'm to lazy to break it down here so use this link.... - Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes8y
Originally posted by @Ellis Hammond:
This was a convo my family had around the dinner table last night as some are leasing and some are buying their car. I was wondering what the BP community thought about leasing a car.
Lets make the assumption that you want a new car, can afford a $150-$300 payment and would plan to pay off your car in 10 years or less if you decided to finance to purchase.
If you plan on becoming a Real Estate Investor (or even if you don't,) it's best to buy a car you can pay cash for and drive that. If you can afford $15000 cash, you can allow yourself to buy a $15000 automobile. If you can afford $1000 cash, you buy a $1000 vehicle. If you have no money saved up, you should ride the bus.
If you have no money saved up, and you can't bring yourself to utilize public transportation, you should buy (not lease) the cheapest used car you can find. Leave your emotions and any "I really want that kind of car" out of it.
Once you have accumulated 10, or 20, or 50 doors, then you can go buy the car of your dreams.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Originally posted by @Caleb Heimsoth:
@Ellis Hammond I have a huge bias towards foreign cArs, specifically Asian made ones like Honda or Toyota. They last forever. My current car will rust out before the engine dies.
I still think buying a used cAr outright is the way to go. You can buy a nice used car for 10k or less. Keep it for 5 years and repeat. Or keep it longer.
Not saying your wrong.... but
my lease was tad over 8k over 39 mo's that's not that far off from 10k and 5 years... and even less so when we're talking monthly payment.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Originally posted by @Randy E.:
Originally posted by @Ellis Hammond:
This was a convo my family had around the dinner table last night as some are leasing and some are buying their car. I was wondering what the BP community thought about leasing a car.
Lets make the assumption that you want a new car, can afford a $150-$300 payment and would plan to pay off your car in 10 years or less if you decided to finance to purchase.
If you plan on becoming a Real Estate Investor (or even if you don't,) it's best to buy a car you can pay cash for and drive that. If you can afford $5000 cash, you buy a $5000 automobile. If you can afford $1000 cash, you buy a $1000 vehicle. If you have no money saved up, you should ride the bus.
If you have no money saved up, and you can't bring yourself to utilize public transportation, you should buy (not lease) the cheapest used car you can find. Leave your emotions and any "I really want that kind of car" out of it.
How does this make any sense.... if I had say 50k cash for a car, why not put 50k down on a house and then use whatever I make from the house towards a car I lease/buy whatever... Seems silly to tie up my cash in a car....
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8y
@Matt K. don’t forget insurance. That usually costs more with leasing.
You’re free to do whatever you want. I’m just saying what works for me. My next car will likely cost less then 10k, probablt 5-7. The one after that I will probably spend more on as by then I should be at or close to 1M net worth.
- Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes8yI like GM cars myself . If it needs anything I can go down to my local autozone and buy parts for a fraction of the foreign brands and the parts are always available so I can do a last minute fix and be up and going . They have been very reliable for me . Most gm motors are bulletproof and require very little maintenance aside from regular oil and filter changes in my experience.i doubt I will ever lease . No matter how shiny and new A car loses 25% of its value when it’s driven off the lot ,and it just goes down from there as the miles add up . As investors we should be thinking way smarter than this because we would never buy a property that was worth 25% less after closing day and then just depreciate from there on !
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Originally posted by @Caleb Heimsoth:
@Matt K. don’t forget insurance. That usually costs more with leasing.
You’re free to do whatever you want. I’m just saying what works for me. My next car will likely cost less then 10k, probablt 5-7. The one after that I will probably spend more on as by then I should be at or close to 1M net worth.
Lease requires full coverage.... but if something happens to the lease you don't have to worry about the payments. Which is why you always want as little down as possible...
But on flip side of that it's not hard to find new cars w/ maintenance included... which on a older car can add up quite a bit if you're not the diy type.
I'm by no means trying to talk anyone into a lease or a new car... I'm just providing a counter point to some of the value of a new car... - Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes8y
Originally posted by @Matt K.:
Originally posted by @Randy E.:
Originally posted by @Ellis Hammond:
This was a convo my family had around the dinner table last night as some are leasing and some are buying their car. I was wondering what the BP community thought about leasing a car.
Lets make the assumption that you want a new car, can afford a $150-$300 payment and would plan to pay off your car in 10 years or less if you decided to finance to purchase.
If you plan on becoming a Real Estate Investor (or even if you don't,) it's best to buy a car you can pay cash for and drive that. If you can afford $5000 cash, you buy a $5000 automobile. If you can afford $1000 cash, you buy a $1000 vehicle. If you have no money saved up, you should ride the bus.
If you have no money saved up, and you can't bring yourself to utilize public transportation, you should buy (not lease) the cheapest used car you can find. Leave your emotions and any "I really want that kind of car" out of it.
How does this make any sense.... if I had say 50k cash for a car, why not put 50k down on a house and then use whatever I make from the house towards a car I lease/buy whatever... Seems silly to tie up my cash in a car....
Matt, if you're still in house acquisition mode, hunting and buying and renting to prepare for a better future for you and your family, it doesn't make any sense to buy a $50K car in the first place.
When I referred to how much money someone might have in savings, I meant how much someone might have that was not allocated to any other need. If you need that $50K to buy a new investment property, it should NOT be considered "car money".
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8y
@Matt K. maintenance is hard to predict. I’ve done nothing to my car since I’ve owned it, besides oil change and tires. It’s 12 years old and has 150k miles. I’ll probably start looking for a new car around 180 and just keep it until it stops running. Lol.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Originally posted by @Randy E.:
Originally posted by @Matt K.:
Originally posted by @Randy E.:
Originally posted by @Ellis Hammond:
This was a convo my family had around the dinner table last night as some are leasing and some are buying their car. I was wondering what the BP community thought about leasing a car.
Lets make the assumption that you want a new car, can afford a $150-$300 payment and would plan to pay off your car in 10 years or less if you decided to finance to purchase.
If you plan on becoming a Real Estate Investor (or even if you don't,) it's best to buy a car you can pay cash for and drive that. If you can afford $5000 cash, you buy a $5000 automobile. If you can afford $1000 cash, you buy a $1000 vehicle. If you have no money saved up, you should ride the bus.
If you have no money saved up, and you can't bring yourself to utilize public transportation, you should buy (not lease) the cheapest used car you can find. Leave your emotions and any "I really want that kind of car" out of it.
How does this make any sense.... if I had say 50k cash for a car, why not put 50k down on a house and then use whatever I make from the house towards a car I lease/buy whatever... Seems silly to tie up my cash in a car....
Matt, if you're still in house acquisition mode, hunting and buying and renting to prepare for a better future for you and your family, it doesn't make any sense to buy a $50K car in the first place.
When I referred to how much money someone might have in savings, I meant how much someone might have that was not allocated to any other source. If you need that $50K to buy a new investment property, it should be considered "car money".
I could bore you with the math... but let's put it this way, I'd almost always put the money into a new investment (not even just house) vs paying a car for cash. A paid off car doesn't help me and shifts ALL the risk to me.... if I drive it on a public road I'll shift the risk to someone else.
- Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes8y
We're almost seeing eye to eye. An expensive car doesn't help me, period.
Maybe when I've attained a more rarified income level I will be more concerned about owning an expensive automobile to help prove I've qualified myself for some exclusive club. Right now, I'd rather shoot myself than buy a $30K car, new, used, leased, cash, or loan.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Originally posted by @Randy E.:
We're almost seeing eye to eye. An expensive car doesn't help me, period.
Maybe when I've attained a more rarified income level I will be more concerned about owning an expensive automobile to help prove I've qualified myself for some exclusive club. Right now, I'd rather shoot myself than buy a $30K car, new, used, leased, cash, or loan.
Does this club you speak of let people in w/ 250 mo car payment lol.... oh about that risk thing, this car (lease) got rear ended little tap, the other insurance fixed it but it's on the car fax now. Per my lease, residual is 20k in about a year, w/ about 15k more miles allowed.... I tried to trade it in a few months ago... 16k because of the car fax. Soon to not be my problem come next year.
- Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes8y
Matt, I'm not trying to convince you to not drive any car you wish to drive. The OP asked a question and I offered my opinion. The next time everyone in the world follows my opinion will be the beginning of the end of the world.
If you enjoy your car, by all means, please continue to enjoy it. I'm simply stating what makes sense to me.
- Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes8yMy friend has a water treatment company he sells water softeners within a 100 mile radius and he travels everywhere sometimes putting over 30k a year on his little Chevy HHR that he paid 5 grand for in cash . I asked him the other day if he was going to get a nicer better looking car anytime soon . He just laughed and said “ this ugly little car makes me a lot of money ! I m not getting rid of it ..I get over 50 cents a mile in write offs and it gets great mileage and its paid for . It actually pays me to drive it !” That made me rethink my ideas for a company car and travel costs for my llc
- 8yDebbie W.Pro MemberLindenhurst, NY · Member since 2017 · 75 posts · 35 votes
I personally have always gone with the "till death do you part" theory of owning a car. I don't like leasing.
My brother leased a car for his wife, they ran into a financial blip but the payments were theirs for another year and a half. A friend wanted lower payments so paid more up front for her lease. Unfortunately, she was t boned by a teen and she owned nothing. THe insurance company paid the car dealer. Not her.
I don't think a car is an investment. It is a mode of transportation. As I've aged, I prefer more comfortable modes but keep it way less than a mortgage payment. My husband used to lease. He loved it. To each their own.
- Entrepreneurial Life Coach/Investor · La Costa, CA · Member since 2015 · 18 posts · 8 votes8y
I did something I will not classify as a mistake, but I will never do it again. Beware! I leased a new car for 42 months. My research showed this is the most profitable term for the leasee. My plan was to buy the car at the end of the lease so I opted for the lowest mileage allowance knowing there would be no penalty with me buying the car. All of that was just fine, until it came time to finding financing for the buy. I learned the older the car, the higher the interest rate and the shorter the term. My finance payments were a bit more that my lease payments!
You mentioned a 10 year term, that is rare, and usually requires a car of $100,000+. Terms of 3 or 4 years are most common, 5, 6 and 7 years are possible for newer cars, again older is shorter. For some years I had both a leased car and one on purchase. At that time I was easily able to fully deduct the lease for business. Rare are the people who can fully deduct all lease costs of a car that is not solely for business, the difference is lost. If you have two cars you can pay for less miles on your lease. Don't be too afraid of the mileage allowance, you can calculate the cost of adding 10,000 miles before you sign the lease and the number will not stop you heart.
My current plan is like a lease in a way. I keep and drive my cars for +/-10+ years. I usually buy +/- 5 year old luxury cars. If you shop well you can find good deals at the luxury car dealers who know who will be bringing in what off of a lease. They will work with you as they know you're looking to buy. If you credit good you can get a low percentage and payment for 5 years and drive for 5+ years paymentless. I just bought a 2010 Lexus with 56,000 miles in near mint condition; which was a wife's car from a couple who have been buying Lexus from the dealership for 25 years, full service records, 37 mpg and no wear or tear. In closing, most people who are leasing shouldn't be. Buying is better for most people, unless you are flipping 20+ properties per year and have a large enough cash flow to make a lease make good sense. Do not leave your accountant and tax man out of the decision, they are ones who have to grind the numbers and will be best able to tell you your best deal. Good luck its a question with no answer! LOL! - 8yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Matt K.@Joe Splitrock@Caleb Heimsoth
Ideally you are paying cash for a car that is about 3 years old or more so that you are not paying for most of the initial depreciation that occurs. aside from some exceptions, most individuals finance cars because they cannot afford it and therefore shouldn't be purchasing it. This is something I struggled with myself for a couple years between new car vs used and paying cash vs financing. Best of luck!
Compass5122 Reviews - Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes8y
Cash for car doesn't help you one bit if you can match or outperform the debt...
Unless you are getting a significant discount to assume the risk....
For the record my new car (had I bought it ) sold for nearly as much as a used model (but with few more options).
And I can't stress enough...if your lease makes you money at the end (because it is worth more than market price ) then you had a bad lease and paid for they difference over your term. You want the car to be worth more than market so your lease payments are lower (but you will need to turn in the car at the end). Plus some cars just don't lease well as all (Audi for example) where you'll almost always be better off buying. Finally some cars (civics Tacoma's etc) can be better investment to buy new because they hold resale extremely well.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
Be mindful of who you listen to. If my family and I (parents and siblings) were discussing whether to buy or lease a new car, they would buy. A new car. I'd be flopping on the floor, foaming at the mouth humming lalala with my hands over my ears. Why?
They only gat 1 house. They rely on social insecurity and small govt pensions. They took massive depreciation hits to a gasping balance sheet over and over and it shows. I may drive an $1800 minivan with 105k miles on it, but I have dozens of mostly paid for rentals.
True story- I bought a house for $90k cash 3 weeks ago. While we were working on the deck, a young dude with a new Tesla X came over and Easter egged it for is (where it dances to the beat and the doors fly like a bird). We paid about the same for our purchases, his car and my house. I told him he could have both, but alas, he did it backwards. The house will net $650/mo cf. Buy the house first, then use the cf for the payment if you have to have it I said. He looked at me cross-eyed and drove off.
Family and friends are usually horrible financial advisors. I'd wait to buy nice cars until after you've built a portfolio. I have a nice car, but I bought with cash from a broke college kid in over his head. He took a $18k value loss over 3 years. Like he could afford that! Don't buy new until your worth a mil and can take the depreciation hit IMO.
- Rental Property Investor · La Place, LA · Member since 2014 · 109 posts · 82 votes8y
You really have to look at it on a case by case basis. Find a car you like and then compare lease vs. finance. Also, do a little research on how a lease is setup to make sure you are getting a good lease. I have leased and financed and honestly didn't think the lease was bad. Payment was lower and the mileage was fine for my situation. Paying cash is a great idea but at the same time banks are offering 1.9% financing so I can use the same amount I would pay for a car and get a much better return which would allow me to then pay cash for a car later down the road.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes8y
You know, Bigger Pockets, a site about real estate, comes up with a major thread on cars at least once every two weeks. And we all sit around and discuss. I have no doubt that by this time next week, this thread will have a hundred responses in it.
Cars are incredibly important to us.
How many threads with many responses does BP come up with on children every month? On holding a marriage together? On wise charitable giving? On how to make up a budget for weekly food shopping? These are equally unrelated to real estate, yet arguably as deeply related to personal finance as cars are, but I don't see those threads here. That's not what most people here are really passionate about.
We're all just mind-controlled meat puppets when it comes to toys with wheels.
- Rental Property Investor · Member since 2018 · 483 posts · 956 votes8y
@Jim K.
Right on! Jim
Who gives a flipping biscuit what someone drives. I read a thread the other day where one guy told another that no serious investor would spend more than 5k on a car. I spent 170k in the last 3 years on cars. I guess I'm not a serious investor and I'm just trying to keep up with the Joneses. LOL
- Rental Property Investor · Las Vegas · Member since 2018 · 87 posts · 87 votes8yI believe the real ‘Bigger Pockets’ answer to this question should have been: Don’t lease or buy. Take the bus and save the money towards a down payment on another property deal. But seriously. I personally recommend 3 year old certified pre-owned. Having a brand new car is nice, but really unnecessary. A certified pre-owned usually has all the same warranty benefits of a brand new car, with a good chunk of depreciation already factored in. I’d say the older the better, but I believe most dealers don’t CPO vehicles that are more than 3 years old. That said, I haven’t had a car for 6 years now due to my proximity to work and shopping (I’m in an extremely high density urban area). I really do take the bus or walk. The freedom from a car payment, insurance payment, and paying for gas has been great (not to mention paying for a parking space around here) and I have saved a ton of money from that.
- Springfield Gardens, NY · Member since 2017 · 258 posts · 63 votes8y
WOW this is such a good thread - this is a discussion that always comes up.
IMHO the answer is IT DEPENDS ON THE PERSON
I have done both, I have bought a new car (financed it for 5 years) and I have leased cars.
For me personally I prefer leasing. Here is why.
1. It depends how many miles you drive a year, you can get a lease with 15,000 miles a year, typically leases are 10k - 12k miles, to bump it up to 15k miles increases your payment slightly, If you drive over 15,000 miles a year - then 100% buy your car.
2. If you are the type of person (and not saying anything is wrong with it) that takes care of their car, and drives lower miles on the spectrum, lets say around 10,000 miles a car, and is OK holding it for 7+ years your better of buying - financially you will be ahead, and when you want to sell it to buy a new car, your car compared to other cars (same model/same year that are also 7 years old for example, yours will have lower miles = more value)
SO THE MAIN THING IS HOW MANY MILES YOU DRIVE A YEAR
3. This is one I really didn't see anybody mention - REPAIRS/CONVENIENCE
When you own a car after the warranty expires, that's when you have more "problems" with your car and your car needs to go to the shop more often (not usually an issue with a new car 1-3 years old) So yes you don't have a car payment, but what about taking it to the shop and paying for this, and paying for that. now the AC broke, now the heat broke, now the transmission is going, now the radio stopped working, on and on and on......
4. What about "time is money" when you lease a car, any issues, I call the dealer - everything is covered under warranty anyway, set up appointment, come in, pick up loaner car, then come back pick up my car don't have to pay anything, and I can worry about real estate, not about my car and the mechanic, I am sure that has some value.
5. And LASTLY - My car is my office, I am driving around from this property, to that property, etc etc, so I am spending a ton of time in my car, I am sure many of you are also - so yes it does make a difference when you have a new car, you are more comfortable, you work better (again it depends on the person, some people get comfortable and get lazy, some other people driving a new car makes you work harder) the newer technology does make you more productive/efficient, you work better, would you rather spend 4 -5 hours a day in a brand new car or a used car?
Again that's only my opinion and I know you can look at it differently.
It goes with out saying - You should only lease/buy/finance car you can afford, if you go in over your head, neither makes sense.
ohhhh and as a tip, if your going to lease a car USE A LEASING BROKER!! Car dealers HATE leasing brokers!!! Leasing broker will get you the same brand new car, at the lowest price (they move a ton of cars, so who do you think gets a better price? you that lease 1 car every 3 years, or a leasing broker that leases 50 cars a month? also depending on what car your looking to get you should shop leasing brokers, certain ones focus on different car companies and get better deals than others) the leasing broker delivers the car to your house, and everything else is the same, you still make your payments to the same place, the dealership still honors your warranty, loaner car.
- Rental Property Investor · Edison, NJ · Member since 2016 · 753 posts · 565 votes8yLeasing is throwing your money away since you do not own the car. The best way to own a car is to save up the cash and buy a car which you can afford. Making car payments instead of investing that amount in real estate or a retirement account will slow down and limit your real estate and retirement goals.
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