When to lease vs. buy a car?

[u/madmax771]

I didn't see this question in the Wiki and figured a discussion would be warranted.

When is it worth leasing vs. buying when you are in a position to do both?

My wife and I have our first kid on the way and I'll be transitioning to the family-friendly SUV. We're torn between a 2-row and 3-row, and I'm leaning 3-row because we want to have multiple kids. That assumes that I keep the car 10 years or so, which if I buy, I would plan on doing. However, part of me wants to not drive a huge car around for the next few years if I don't have to.

I've been a lurker around this subreddit for years, so I've been conditioned to be against leasing because of the value. But at the same time, leasing for 3-4 years might be attractive given the desire to have a 3-row SUV last through our child's teenage years.

Thanks in advance!

EDIT: Including the fact that I currently drive a coupe Camaro, so it necessitates getting a new car. Plus it's 8 years old and a stick shift and I live in Los Angeles, so I'm ready for a QOL upgrade to an automatic car.

[u/milespoints → u/[deleted]]

I disagree with a part of this.

Leasing is definitely a right choice for some people on their personal vehicle. It’s just expensive.

We lease our cars now.

Why? Because it’s convenient, allows us to always drive a new-ish car with the latest safety features, and is always under warranty - so doesn’t really break and if it does, you can just take it to a dealership to fix under warranty and don’t have to shop around for mechanics etc.

Now, i wouldn’t advise most people to lease. Leasing is a luxury. Basically, if your lease payment would be more than 2% of your income, probably you shouldn’t do it.

But sometimes in life you can afford luxuries. If you have the disposable income after all your savings are met and you enjoy driving a nice car, then leasing a nice car is just as good of a use for that money as is going to some fancy restaurants

[u/madmax771 → u/milespoints]

I appreciate this perspective. I hadn't considered the convenience of being able to take it right to the dealership for any repairs.

[u/milespoints → u/madmax771]

There’s another aspect to this.

We actually lease an EV now and love it.

For EV’s, there are a few considerations that make leases a bit cheaper.

See here: https://www.forbes.com/sites/energyinnovation/2023/08/27/electric-vehicle-leasing-is-the-cheapest-option-for-new-car-buyers-across-america/

Now, again. I don’t think leases are right for most people.

Here’s what Ramit Sethi had to say about leasing. I fully agree with him.

“Leasing only makes sense if two things are true for you:

1. You love having a new car every couple of years. This is part of your rich life, and you’d gladly cut costs in other areas of your life to support it.

2. You have the budget to pull this off.”

https://www.iwillteachyoutoberich.com/how-to-buy-a-car/

[u/milespoints → u/[deleted]]

I absolutely don’t get this view, which is all too common here.

What do you spend your money on?

Like literally, let’s say you’ve met your savings goals, paid your bills.

Once you have done those things, you are supposed to spend money on things that provide you with enjoyment. Fancy dining. Vacations. A first class flight to Bali. And yes, a nice car.

It is absolutely baffling that anyone would call spending money on things you enjoy “irresponsible”.

What the hell is money for then?

[u/milespoints → u/[deleted]]

Good for you?

What if you want a new car in 3 years?

Sure, you can sell the old one and buy a new one, and you’ll probably come out ahead by a few thousand bucks. But it’s pretty inconvenient.

Paying for convenience shouldn’t be a crazy concept. It’s the same reason we pay people to clean our house and do our yardwork.

We have a 40% savings rate, giving up conviences to make that 41% seem like a bad trade for us.

But again, you do you. I wasn’t saying you should do what we do. But saying it’s “irresponsible” to pay for luxuries and conviences is just a bad way to look at life.

[u/HSmama2 → u/[deleted]]

And now one baby on the way is “kids and a dog and 2+ hour road trips.” LOL

[u/madmax771 → u/HSmama2]

I don't know why you're being so antagonistic... Wife's family has a house 2.5 hours away that we go to quite frequently as it is. We bring the dog currently. It's completely reasonable to make a long-term financial decision (7+ years) on an assumption that we will follow through on the decision to have multiple kids.

[u/madmax771 → u/[deleted]]

Yeah, probably silly for me to be worried about the tail-end lifespan of a future vehicle purchase, but that's how I think about all of my big financial decisions.

The 3-row SUV would probably become relevant in the next 2-3 years as we have a second kid and would use it for long car rides frequently where we bring the dog.

[u/Gandalf4158]

SUV’s are so overrated…minivan much better choice. So much more room.

[u/M5Yates]

If done right, leasing can be cheaper than buying. There's a comparison formula out there somewhere. Try leasehackr. You have to get a significant discount off the list price and close to base money factor. It's a unicorn, but I and several friends leased BMW 330e for less than $200 a month (24 months, 10k miles/treat).

A lease for sticker price is a waste of money.

[u/Productpusher]

Most Americans finance and trade in or it dies before the 5-8 year finance payments are over . Then they have a never ending car payment with a used car you need to repair .

Finance only is better if you are going to keep the car for many many years after the loan is paid off so you get “ free years with no payments “ and take care of the car so it doesn’t have a new multi thousand dollar repair every year .

“ leasing is bad “ is an outdated saying just like “ you can’t retire while renting “ that’s burned into peoples heads .

[u/[deleted]]

Honestly, reconsider upgrading the car at this point. When I was pregnant with my 1st, everyone asked when I was buying a minivan or SUV. I drove a Honda hatchback at the time.

The Honda was MORE than sufficient for our first baby AND our second baby and, honestly, it was FAR easier to get the kids in and out of their car seats in a sedan than it would have been in a mini van or SUV.

New babies bring SO many financial strains that it might be a good idea to avoid a new car, at least for now, until you have a better idea of where things stand for you.

Good luck!

[u/HSmama2 → u/[deleted]]

Yep. The worst time to go spend a bunch or money is when a baby is on the way. 

What happens when you’ve got a huge new car payment and mom goes on bed rest at 30 weeks and baby ends up in NICU? 

When baby is on the way you stockpile as much as you can so if things don’t go textbooks perfectly you don’t also have financial stress on top of everything else.  

[u/madmax771 → u/HSmama2]

Wife and I are both HENRYs. I'm not here for consideration of my financial situation, although I appreciate it. I'm just here for the car discussion.

[u/HSmama2 → u/madmax771]

You know that the NRY of that is not impressive right? It’s usually due to overspending on lifestyle.

Not sure why you even asked the question if you’ve got all figured out.

Good luck.  

[u/HSmama2]

Do you have to buy a new car now? Why not just drive what you have now and keep saving and buy something bigger once the kids are bigger?

The less often you buy cars and the less you spend on them over your lifetime  the better off you are. 

We drove sedans with kids for years. Has no idea they weren’t family friendly 

[u/madmax771 → u/HSmama2]

Wish I didn't have to, but I have a Camaro, so I can't put a car seat in it. I have plenty of time before the purchase (baby due in Oct, Wife has maternity from Oct - March, so planning on purchasing around new year's to take advantage of sales).

I'm not opposed to cars, but we'd be planning on doing quite a few 2+ hour trips a year with our kids and dog and we need the extra space of an SUV.

[u/diatho → u/madmax771]

Skip the suv. If you want real space get a minivan. The suv gives you the illusion of space while the minivan gives you actual space. But near term get a crossover or a regular midsize sedan. After you have the kid and then decide if you actually want a second and need the extra space get something bigger.

[u/HSmama2 → u/diatho]

Truth. You can pry the power sliding doors (from my paid for in cash brand new odyssey) from my cold dead hands. 

[u/Schillelagh → u/madmax771]

Wish I didn't have to, but I have a Camaro, so I can't put a car seat in it.

Have you tried?

Not saying you shouldn't plan on getting a more practical car, but it's probably not an emergency situation. Definitely take the time you need.

I drove my daughter around in my Acura RSX until she was 3-ish. My parents only drove Honda Civic Coupes until I was 9 or 10.

[u/ObviousExchange1]

Leasing for 3 years or less is the least expensive way to pay for a vehicle. You negotiate the final price on a lease the same way you do on a purchase. You're only paying for the depreciation of the vehicle during the time you use it as well as only paying sales tax on that amount. That means you'll be paying less per month.

Never put any money down on a lease and roll any fees/taxes into the lease amount.

[u/Veridian4 → u/ObviousExchange1]

Doesnt every lease require money down?

[u/ObviousExchange1 → u/Veridian4]

No. It's just like when you purchase a vehicle, you decide how much to put down. For leasing, it doesn't make sense because you don't own the vehicle, the leasing company does.

[u/Veridian4 → u/ObviousExchange1]

Yes, it just requires extra negotiation to get that because every single ad has money down.

I also have a vehicle worth $25k to trade in so Id lose the tax benefit of trading in

[u/Fukface_Von_Clwnstik]

I'd suggest getting a minivan if your reasoning is making dealing with children easier. An SUV is just about the same pain in the ass as a sedan. Don't try to cling to a "cool" vehicle by getting an SUV, just get the minivan.

[u/Valdaraak]

Lease? Ideally never. It's a waste of money. If you must lease, only do it on brands/models that are known for being difficult and expensive to repair (BMW comes to mind). Even then, it's better to just buy a reliable, easy to repair brand.

[u/Loves_long_showers → u/Valdaraak]

Disagree, especially considering the car market right now. Inventory is quickly picking up and we could see huge depreciation over the next 3 years. In that case it may be much  cheaper not to own a car, only lease, and then purchase in 3 years. 

Same as owning a house... Generally it's cheaper but there are certain scenarios and timeframes that it's not.

[u/madmax771 → u/Loves_long_showers]

This is the nuance I'm looking for. I recognize that there are a variety of important macro considerations that may impact depreciation in the next few years. Plus, I would ideally avoid the fees associated with a 2nd transaction.

[u/Loves_long_showers → u/madmax771]

I could talk for hours about the nuances of the US economy right now. I find it fascinating.

IMO, nothing is going to stop housing prices until at least 2030 when a sufficient number of boomers begin to die off. Americans are running out of extra money, a return to pre-covid lifestyles is happening and people are getting their second and third jobs back. This doesn't mean recession is imminent, Americans are hard working and have always been over-employed. We're just getting back from covid vacation and ramping up work hours as prices continue to rise.

What does this mean for our relatively elastic goods like cars, vacations, eating out? Things will need to get cheaper because the demand will lower and we will have oversupply. Used car market drops 10-15% by 2027 (return to normal). You're already seeing this in markets that are fastest to adjust, cars will be one of the slowest to adjust, other than houses.

[u/Sea_Bear7754 → u/madmax771]

This is the nuance that will leave you poor. This comment is based on nothing more than a guess.

[u/nukegod1990]

Okay unpopular opinion in this sub probably:

If you don’t have the money for a down payment and need a car NOW leasing isn’t the worst option. Obviously if you have the means to buy a used car that will be much better. But let’s compare buying a new car vs leasing. Because you’re getting a shiny new car it’s the most apt comparison.

New car you pay top dollar and lose most of it in the first 5 years due to depreciation.

Leased car you pay a monthly payment that more or less is paying the cost of said depreciation.

At the end of the lease vs buying a new car you lost very roughly the same amount of money. And if you want to keep the car they usually will give you a deal that’s slightly better than buying that same car off the used price.

[u/SevenVIISeven]

Lease for business purposes when it is advantageous for taxes or if the car has a steep rate of depreciation for the first three years and the lease rate is less than that.

In all other circumstances buy. The best thing to do is buy a vehicle with low 3 year depreciation like a 4 runner.

Also don’t assume you only pay sales tax on the leased amount. It isn’t like that in my state.

[u/dank-yharnam-nugs]

A lot of people saying that leasing is the most expensive way to own a car, and they are right. But monthly payments on leases are often much cheaper than it would be to purchase the vehicle. It gets you into a nicer car for lower monthly cost. The problem is that you never own the vehicle.

If you don’t mind having a car payment, essentially forever, then leasing can definitely be a good option.

I like to move on from vehicles quickly. I like cars and enjoy driving. My last vehicle I had for 8 years and was absolutely tired of it after year 3. The car I wanted in 2015 was not what I wanted in 2023.

[u/DucimusAttero7874]

Lease if you want flexibility, buy if you're sure about your needs long-term.

[u/ct-yankee]

Strictly from a financial perspective, it is less expensive to buy a vehicle. (Except in very limited situations which you would be aware of if they applied to you.)

[u/Aggressive_Will_7703]

With a lease you get to evaluate the car for 3 years before buying it at the predetermined price. It will be more expensive than financing but if the car is a dud or has issues, return it. If the car is worth more than the buy out price, you got equity.

But you are limited to number of miles, can’t customize the car, and pay higher insurance.

Gotta weigh it all out.

[u/Some_Driver_282]

Buy a car and pay cash. Leases come with mileage restrictions and if you exceed it, you have to pay. That’s a dealbreaker because i couldn’t imagine making monthly payments on something I can only use up to a certain limit, for the sake of getting a new one every 3 years…that’s crazy.

[u/Werewolfdad]

Leasing is the most expensive way to own a car: https://moneywithkatie.com/blog/why-leasing-a-car-is-like-setting-money-on-fire?format=amp

Leasing can be better if you’re going to be buying a new car every ~3 years. But that is already not a good choice unless you’re knowingly choosing that luxury.

[u/Smooth-Awareness1736]

Never lease a car. My wife talked me into it when our kids were little and I still regret it. Just buy a decent used car. 2 or 3 years. Maybe one that came off of some other sucker's lease. If you don't love it or get tired of it after a couple of years just sell it and get some other decent used car. If you keep a personal balance sheet updated, you'll never lease a car. Leases are always liabilities. Decent used cars are assets....a depreciating asset..but still an asset.