Should I Buy or Lease a Car? with Jill & Kylie
On this episode of Financially Naked: Stories from The Financial Gym, hosts Kylie and Jill, two Certified Financial Trainers, dive into the pros and cons of buying versus leasing a car. They break down key factors like maintenance costs, mileage limits, and the financial implications of each choice. Whether you're looking for the latest model or aiming to build long-term equity, Kylie and Jill offer insights to help you make the best decision for your situation. At the end of the episode, they play a fun game where they match various scenarios to the best car-buying approach and you can play along at home.
Podcast Notes
Buying vs. Leasing
Jill shares her personal experience with purchasing and leasing cars. She used to think buying was always the better option, but her time in Europe opened her eyes to the benefits of leasing.
Both buying and leasing a car have pros and cons. What's best for you will depend on your needs, your budget, and your long-term plans.
Leasing a car is like renting an apartment; you take the car for a specific period of time (usually 2-3 years). Rather than taking out a loan and paying for the vehicle in full, you're paying for the car's depreciation for the time you have it.
When you purchase a car, there are a few different options for how it is paid. You don't have to worry about monthly payments if you can pay for the whole thing in cash. If you take out a loan, a down payment may be required, and you'll make monthly payments.
Pros and Cons of Leasing
Leasing is a great option if you want the newest car or the latest technology every few years. It allows you to upgrade every few years without a long-term commitment to one car.
Maintenance costs for leased vehicles are typically lower since you're driving a new car, and the lease covers most of the costs. However, leasing does come with a mileage limit. If you go over the allotted miles during your lease, there will be penalties at the end.
Leasing has no equity-building benefits, and you'll always have a monthly payment compared to eventually owning the car outright if purchased. If you want to keep the same vehicle for more than 3 years, leasing is probably not the best option.
Getting out of a lease can be expensive, so it's important to know you can commit to the car for the length of the lease before signing. Leasing can have lower monthly payments than purchasing because you're paying for depreciation, not the car's total value.
Pros and Cons of Buying
When you own the car, there are no mileage restrictions, which makes it a better option than leasing for people who know they drive long distances or frequently.
Although purchasing a car can involve more upfront costs, it can be more cost-effective in the long term. Once you own the car, you no longer have monthly payments. The longer you own a car, the more maintenance and repair will need to happen, so you'll want to budget for that.
If you like to customize your car, buying gives you the freedom to do so. When you lease a vehicle, you cannot modify it since it will be returned to the dealership at the end of the lease.
Sometimes, when you buy a car, the loan amount is more than the car is worth because of depreciation. If you need to sell the car, this can be a challenge because you still have to pay off the loan, even if you no longer own the car.
If you want to work with a Certified Financial Trainer to help figure out whether you should buy or lease a car, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.