“Leasing is like throwing your money in the garbage.”
If you’re a millennial, you’ve probably heard some version of this line from your parents at least once. Past generations equated wealth with owning things—cars, homes, etc. But that was then, and this is now! Today’s H.E.N.R.Y.s™ know that being rich isn’t always about what you have, it’s about having the freedom to do what you want.
YOUR CAR ISN’T AN INVESTMENT
Cars are almost always depreciating assets, meaning that their value goes down over time. In fact, a car begins losing value the minute you drive it off the lot—as much as 11%! After one year, most experts agree a car has lost about 20-25% of its original value.
THE BENEFITS OF LEASING A CAR
- You can get a nicer car for less, earlier. If you buy a car with cash (which we don’t recommend), you’re typically required to put about 20% down. Instead of waiting to save the 20% down payment, you can lease the car right away for less, often putting as little as 0% down.
- Leasing allows for more flexibility. Leases usually only last 2–3 years; at the end of the lease, you can trade it out for a new or different model, or simply give it back without having to worry about selling it. On the other hand, if you buy the car, you’re stuck with it. Worse, you’ll soon be stuck paying for repairs.
- Leases are typically under warranty, so if something does need to be repaired, you won’t have to pay for it.
- Leasing gives you the ability to choose a lower-mileage lease, making it even more affordable. If you don’t drive much, choosing a 10,000–20,000-mile/year lease allows you to customize a lease to your lifestyle.
THERE ARE SOME OCCASIONS WHEN BUYING IS BETTER
If you’re rough on your car (think: off-roading or parallel parking into impossibly tiny spots) or you drive a lot (like more than 20,000 miles per year), then yeah, buying is probably a better option for you. When you return a lease, you can be for charged nicks and scratches, as well as any extra miles you’ve driven beyond the terms of the lease.
If you’re up for leasing, make sure to brush up on your negotiating skills. Use services like Edmunds to see what other people are paying before you hit the dealership. Leasing a car isn’t like buying a sweater—you’re allowed to barter a little bit to get what you want!
To learn more lifestyle money hacks click here for more articles.