Should you buy a car or lease it? The debate for the average family is not even close. Buy the car. Preferably two or three years old, certified pre-owned and the buyer should work to keep it running for ten to twenty years. Why? The money that the average family can save once the car is paid off far outweighs the cost of continuing to keep a monthly car payment with every new car leased.
Money Saved Buying a Car
For instance, let’s say a driver purchases a new car or a certified pre-owned car. With that purchase, let’s say they spend $350 per month for five years on the car. After five years, the buyer no longer has to make a car loan payment. They have completely paid off the car loan and they own the car without any debt on it.
Now let’s say they keep the car for another ten years or so. Because the owner paid off the car loan that allowed for the purchase and no longer have a monthly payment, they now get to keep $4,200 per year. Over the course of ten years that’s a savings of $42,000. Real savings for a family over time.
The Problem with Leasing
If the driver leases the car however, after the three years of the lease agreement, the driver has to give the car back to the car dealer. They now have to get another car and the payments on the new car start all over again. What that means is that there is no extra $4,200 per year in savings.
Car Maintenance is Key
The key to making this buy over lease strategy work is maintaining the car. That means the buyer should keep up with the periodic maintenance of the car every three months or three thousand miles.
It means they need to get the oil changed, the tires rotated, brakes fixed or changed when needed and most importantly not driving the car to hard. When a driver does all of this, they have a better chance of the car lasting a very long time and saving a lot of money over that time period.
Forgetting the Joneses
One of the downsides to keeping a car for a long period of time is that drivers will not be able to keep up with the Joneses in the best car category. Year in and year out new and more stylish cars come out and having a car that is twelve or thirteen years old doesn’t make the driver the cool kid on the block. But it does mean that the driver will have the chance to save more for retirement, education, a rainy day and family vacations.
So if you are looking to get a new car but you also want to keep your financial security and financial freedom, buy the car and keep if for years instead of leasing it. You’ll thank yourself in the future.
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