Investor · Leawood, KS · Member since 2017 · 178 posts · 108 votes
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.
Almost 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
Pay cash! There’s nothing better than the feeling of no car payments. Get a car that meets your needs. Gets you to point a to b, keeps you and your family safe and is reliable. I’m sure a lot of us REI can afford a number of different vehicle but separate wants from needs. Read the millionaire next door and find out how the wealthy do it. A car is one of the biggest cash flow drainer and a huge liability. So to answer the question: purchase with cash. Don’t lease.
I pay $272/month and will own my vehicle in 4 years. When it's paid off, I'll have another$3,264 each year that I can use to invest. Leasing a vehicle would never produce that luxury.... but maybe you prefer the luxury of having a new car loaded with extras? That stuff means nothing to me, so I'll never lease.
I'm hoping to get 300,00+ miles out of my vehicle. When it wears out, I'll buy another Toyota with 100,000+ miles and drive it until the wheels fall off.
All depends on your goals! I prefer leasing, as it costs about 2/3 of the payment of purchasing the same car (always get monthly numbers based on ZERO down so you're comparing apples to apples), most people don't keep a car longer than 6 years (I know I don't, and you break even/come out ahead of leasing at about the 8 year mark if you purchase), and I love the fact that you never pay repair costs or have reliability concerns.
The mileage restrictions are the only real issues and that issue mostly comes up from people who have never leased and are fearful about something they don't understand. Find out how their mileage program works and how much it is to buy more miles before you turn in to avoid any penalties (you can also always opt to buy the car if you like it and you're too far over in miles). Also depending on what you do for work, it's much easier to write of an entire lease payment.
Hope this helps! It's really up to how you live your life and what you value! This is just what works for me.
By BP standards doesn’t matter if you sit here and read BP posts for the rest of your life, and never actually invest in RE.
Just don’t buy a nice car, or you’re automatically considered a failure at life even if you are already a millionaire.
That's the point, neither the OP nor the majority on here are millionaires... You still haven't answered my question on what you consider to be a POS, btw. Would a turboed 90s 4-cyl honda be considered a POS when it smokes your bimmer?
By BP standards doesn’t matter if you sit here and read BP posts for the rest of your life, and never actually invest in RE.
Just don’t buy a nice car, or you’re automatically considered a failure at life even if you are already a millionaire.
That's the point, neither the OP nor the majority on here are millionaires... You still haven't answered my question on what you consider to be a POS, btw. Would a turboed 90s 4-cyl honda be considered a POS when it smokes your bimmer?
There are plenty of auto enthusiasts that would consider a ten year old BMW a POS. Most the people leasing cars would NEVER consider driving a ten year old BMW (because leasers like new cars). It is all a matter of perspective and is totally opinion. If someone is driving a reliable car that isn't a rust bucket, it is hardly a POS.
Leasing makes sense to me when it is a depreciating asset. Let someone else carry the note (if you can get a decent interest rate) and write it off as a business expense.
Oh sorry I want to correct one thing I said and that is my fault. You did not say paying cash for a house is terrible. Very wealthy investors pay for things in cash and have no debt. Everything else I said I standby.
@Ellis Hammond Leasing a car can be a great tax advantage if you own a business. One solid point, you can fully expense the payments, gas, insurance and maintenance. That's a win. Plus it's reliable since it's new.
If you choose a car that holds it's value, you could buy it after the 3 year term and possibly flip it and make some money. It all depends on your needs and financial situation. Do you drive a lot? Might not be a good idea. Will the lease help your cash flow? Do you own a business? There's a lot of great answers on here, but it all depends on your circumstances. It's good for one person and bad for the other. Good luck man. I have been pondering the same questions.
By BP standards doesn’t matter if you sit here and read BP posts for the rest of your life, and never actually invest in RE.
Just don’t buy a nice car, or you’re automatically considered a failure at life even if you are already a millionaire.
That's the point, neither the OP nor the majority on here are millionaires... You still haven't answered my question on what you consider to be a POS, btw. Would a turboed 90s 4-cyl honda be considered a POS when it smokes your bimmer?
If you have to ask, it’s a POS. Doesn’t matter if you strap a jet engine on it. Ain’t nobody got time for a 4 banger, that sounds like a lawnmower.
By BP standards doesn’t matter if you sit here and read BP posts for the rest of your life, and never actually invest in RE.
Just don’t buy a nice car, or you’re automatically considered a failure at life even if you are already a millionaire.
That's the point, neither the OP nor the majority on here are millionaires... You still haven't answered my question on what you consider to be a POS, btw. Would a turboed 90s 4-cyl honda be considered a POS when it smokes your bimmer?
There are plenty of auto enthusiasts that would consider a ten year old BMW a POS. Most the people leasing cars would NEVER consider driving a ten year old BMW (because leasers like new cars). It is all a matter of perspective and is totally opinion. If someone is driving a reliable car that isn't a rust bucket, it is hardly a POS.
I doubt any auto/BMW enthusiast is calling a naturally aspirated V8 that has a tach limit of 8,600rpm a POS.
@Ellis Hammond
Go back and listen to the podcasts with guest who have been in real estate at least 20 years. Have you ever noticed how many of them went bust or nearly did at some point? There is one thing for certain in real estate and that is that the market will cycle up and down over time. For that reason I choose to keep my personal debt to $0 other than my own house. If the market shifts down not being able to pay for a rental property would suck, not being able to pay for the rental or make your car payment from that cash flow you were counting on would be much worse though. Rather than leverage everything to the maximum now, when the market is good, I’m leaving a wide margin of error to make sure I’m ready when the market turns and even better that I have some equity to tap and money in the bank to buy like crazy when prices go down.
By BP standards doesn’t matter if you sit here and read BP posts for the rest of your life, and never actually invest in RE.
Just don’t buy a nice car, or you’re automatically considered a failure at life even if you are already a millionaire.
That's the point, neither the OP nor the majority on here are millionaires... You still haven't answered my question on what you consider to be a POS, btw. Would a turboed 90s 4-cyl honda be considered a POS when it smokes your bimmer?
If you have to ask, it’s a POS. Doesn’t matter if you strap a jet engine on it. Ain’t nobody got time for a 4 banger, that sounds like a lawnmower.
El-Oh-El your car knowledge is truly shining there (forced induction sounds nothing like a lawnmower, fyi).
By BP standards doesn’t matter if you sit here and read BP posts for the rest of your life, and never actually invest in RE.
Just don’t buy a nice car, or you’re automatically considered a failure at life even if you are already a millionaire.
That's the point, neither the OP nor the majority on here are millionaires... You still haven't answered my question on what you consider to be a POS, btw. Would a turboed 90s 4-cyl honda be considered a POS when it smokes your bimmer?
If you have to ask, it’s a POS. Doesn’t matter if you strap a jet engine on it. Ain’t nobody got time for a 4 banger, that sounds like a lawnmower.
El-Oh-El your car knowledge is truly shining there (forced induction sounds nothing like a lawnmower, fyi).
That’s exactly what FI sounds like a fart-can. Lemme guess you like piped-in sound as well.
Buy a used car in cash! In my belief cars are one of the worst investment. They are depreciating assets. I buy average cheap cars in cash.
To put it in an easy to understand way. Leasing a car is like renting. Financing a car is like buying a house the only different it is far worse because houses on average appreciate and cars depreciate. If you do the math it is good to use leverage for appreciating assets and bad to use leverage for depreciating assets. If you have to finance then you have to. I would buy a used car and do not consider your car an asset. It is a liability (Rich Dad Poor Dad).
Pay cash! There's nothing better than the feeling of no car payments. Get a car that meets your needs. Gets you to point a to b, keeps you and your family safe and is reliable. I'm sure a lot of us REI can afford a number of different vehicle but separate wants from needs. Read the millionaire next door and find out how the wealthy do it. A car is one of the biggest cash flow drainer and a huge liability. So to answer the question: purchase with cash. Don't lease.
An investment property that cashflows enough to cover car payment would feel better than a paid off car...
@Matt K. I understand what you are saying about cash flow. It does feel good to have cash flowing properties that can help you purchase things. I have both a paid off vehicle and properties that cash flow enough to cover a car payment. It’s critical to pay yourself first to gain wealth. By paying the banks first so you can drive a car doesn't help you get another property. I’m not saying debt is bad. I am saying car debt is. I respectfully disagree that a cash flowing property feels better than a paid off car. A paid off investment property on the other hand would feel a whole lot better than a paid off car!
@Matt K. I understand what you are saying about cash flow. It does feel good to have cash flowing properties that can help you purchase things. I have both a paid off vehicle and properties that cash flow enough to cover a car payment. It’s critical to pay yourself first to gain wealth. By paying the banks first so you can drive a car doesn't help you get another property. I’m not saying debt is bad. I am saying car debt is. I respectfully disagree that a cash flowing property feels better than a paid off car. A paid off investment property on the other hand would feel a whole lot better than a paid off car!
So if you had x ammount and it was either a paid off car or a property that would cover the note on the car (lease finance whatver ) you'd pick the paid off car ?
Car loans some of the chrapet debt you can get even though it's over a short period of time...but it's not hard to out pefrom it. Plus shift the risk of the value of the vehicle to bank, you lose most of that protection when it's paid off. This might not matter on some 1500 dollar beater but it could on a 20-30k car...