“So leasing a car is better than buying a car?” was a question asked to me on Twitter.
The answer is that, just as with houses, it depends on who you are and what you’re doing.
So we’ve made this handy dandy guide to figure out where you fit.
If you have consumer debt:
A. Are you trying to get out of debt and build wealth? Buy a Honda, Toyota or Nissan that costs no more than $12k, IN CASH, and with no more than 15k miles for every year that car is old.
Ie. A 5 year old car shouldn’t have more than 75k miles on the odometer.
Oh you don’t have $12k in cash? How much do you have, $4k? Now you know what you can afford.
Oh you have nothing? Sacrifice until you get something. Do not buy things you can not afford. We use double negative sentences when referencing double negative net worths.
B. Are you trying to stay in debt and look rich vs actually be rich? Then keep doin what you’re doin playa. What do you need us for? Buy/lease/go into debt for whatever you want and make sure to have those interest payments each month. You’ll learn. I take that back – you should really aim to go in debt for a $75k Tesla. I own stock in that company – feel free to help me to help me.
(B*tch better have my… interest payments.)
If you’re OUT of consumer debt, but you have other debt to pay (ie. student loans/mortgage left):
A. Do you drive unreliable cars for 10-15 years and want to stop spending a fortune? Lease by using the “single pay lease” method we discuss here.
B. Do you drive RELIABLE cars for 10-15 years? Buy new or used using the money you have in the bank. Oh you don’t have enough money for a new car? Then now you know what you can afford. Do not add new debt while trying to get out of debt. Yes student loans and mortgages are still “bad debt”.
If you’re out of ALL debt:
**You can do whatever the hell it is you want as long as its part of your own individual financial strategy and it doesn’t get you BACK into debt.**
A. Do you want a higher cash flow each month to use for investing? Lease (by paying the whole term in full) and invest the huge difference.
B. Do you want cars owned outright because you like to work on cars etc? Buy whatever car and understand because your cash is tied up in that $45k car, you’ll be able to invest less.
But understand, – if you have monthly payments on any contract – lease, finance or otherwise; that becomes debt owed.
*Note 1: The best transportation for those in urban areas is to centrally locate yourself near work and school then use a combination of public transportation, personal transportation (bikes/shoes) while keeping a paid for reliable clunker parked outside for emergencies (or if you really know how to work the system, Uber is great in an emergency as well). You will pay more in rent but not be stuck on freeways, be healthier and you’ll also not pay hardly ANY of the $832/month most people pay on maintaining recent model automobiles.
*Note 2: The word “Better” in terms of the BKF program depends on what phase you’re in. Are you paying off debt? “Better” is in reference to what costs less. If you’re trying to build wealth, “Better” is in reference to whatever the hell your overall plan is. Do you want cashflow? No worries? You like working on cars? Remember, your better is not everyone’s better.
I hope that settles that.
Don’t worry, you can start again back at the top.
Other posts on cars, financing & leasing:
- HOW TO LEASE A CAR WITHOUT WORRYING ABOUT A CREDIT SCORE (NEGOTIATING A CAR LEASE LIKE A TIGER)
- FOR NEW CAR DRIVERS: LEASING IS NOW KILLING OWNING
Learn more on how to defeat the 12 most dangerous areas in your financial budget by reading my new book: www.ThisisWhyYoureBroke.com