Smart About Money: Is that car lease ‘a devil in disguise’?

Nick Maffeo Money Under 30 says, “It’s easy to see why leases are so tempting. You get a brand-new car and a monthly payment that’s lower than a car loan.

“But leases,” they say, “are a devil in disguise.”

“A devil in disguise” – that’s kind of extreme. Leasing makes sense for some people in some situations. Buying is better for others.

Which is more likely to be right for you? The most important factor when it comes to any major purchase is that you have to know yourself.

If you eventually want to own your car free and clear, then obviously leasing is not for you.

Some people mention needing reliable transportation as their reason for leasing. But the reality today is that many vehicle models have truly-impressive track records for reliability. Leasing repeatedly over 10-12 years will almost surely cost more than owning a paid-off car needing an occasional repair.

Others firmly believe that you’re always going to have a car payment anyway. That kind of thinking may have had some basis in the 1970s when cars just didn’t last as long. Fifty years later in 2022, it’s 100% possible to not have a monthly car payment for years – sometimes a decade or longer.

Most people say it feels great not to have a monthly car payment. That’s money they can redirect to their mortgage or rent payments, other projects or savings. (As a general rule, it makes life easier to have fewer monthly payments.) Plus with an older car, they save on excise taxes and car insurance.

If you get bored with a vehicle quickly or know you’re not inclined to keep up with regular car maintenance for whatever reason, leasing is probably better for you. That’s not a criticism. It’s the same reason why some people are happier as tenants than homeowners.

It’s certainly not “a devil in disguise” to lease. But owning does give you flexibility and options.

If you own your car, you can hold on to it for another year or two if an unexpected development (like a pandemic) makes it hard to buy a new one. If you own your car and realize after two years that you don’t need it as much as you expected, you can sell it. Early terminations on leases can be expensive.

Consumer Reports puts it objectively and clearly: “Over the long term, the cheapest way to drive is to buy a car and keep it until it’s uneconomical to repair.”

If you have the financial resources and you’re not looking for the “most economical” way to get around, leasing might be fine for you.

If you’re not sure and you want a way to compare the options, look for an unbiased lease vs. buy calculator online and plug in the numbers. (Edmunds.com has a useful calculator at Edmunds.com/calculators.)

Or consult with a local independent financial professional who can go through your numbers and options with you. And remember – for some – buying a good used car and driving it for years can be the best deal around.

Nick Maffeo is the President & CEO of Canton Co-operative Bank – right next to the Post Office in Canton. Have a question? Email to info@cantoncoopbank.com.

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