Should you lease a car?

Should you hire someone to mow your lawn? This seems like an innocuous question, right? But the answer to this question can teach you a great deal about personal finance. Here are the classic answers to the, "Should I hire someone to mow my yard?" question:

• Of course, your time is worth more than what you can pay someone else to mow it for you.

• No, it's an absolute waste of money, and you can do it yourself.

Neither of these classic answers are actually the best answer. In my opinion, you earn the right to make this decision. If you are broke and/or are in debt, then you haven't earned the right to make this decision. So therefore the answer is do it yourself. If you have earned the right to make the decision, then I still don't think it's a money decision. I think it's a lifestyle decision. You don't want to mow your lawn? Cool with me. Pay someone to do it. I don't think it's a poor financial decision at all, as long as you've earned the right to make the financial decision. I feel the same way about leasing a car.

I received this email the other day. Check it out:

Soooo.... I was having a vehicle discussion with my brother yesterday and I mentioned to him that I might look into leasing my next vehicle and my mom chimed in to say that was a terrible idea because in the end, you don't own anything. I'm not that concerned about having something of "my own." Should I be?

I'm 30 yrs old, not married, and the thought of a newer vehicle (aka maintenance-free vehicle) sounds pretty good to me! Others I know lease and the idea of having something newer every couple of years for that reason of having less maintenance with a newer vehicle would be nice (I probably have to have something "major" done every year, if not every other, i.e. new brakes, electrical issues, steering column something or other, new tie rods, etc.). I don't necessarily need a brand new vehicle for looks or anything -- I'm not concerned about that.

My current vehicle is nearly 10 years old (I've had it for about 5), has 137K miles on it, and I will have it paid off this year. I plan to drive it as long as I can but want to have something in mind for when/if I have to look at a "new" vehicle (rather than be in a fire-drill situation where I have to make a fast decision if something happens to my current vehicle and in the end not knowing if I made the best financial decision for myself or not).

Can you identify some pros & cons to leasing vs buying for me please? I'm trying to educate myself on this topic so I know what to do in my situation when the time comes.

Thanks for your help in advance!

Lauren

There is a not blanket answer for the question "Should I lease a car?" Whereas some financial experts will tell you that it's a waste of money to rent a car, I completely disagree. That being said, I personally will never lease a car. I hate having a car payment. I don't care whether the car I'm driving is "under warranty" or not. And I don't care about having the latest, greatest car. I've earned the right to feel this way.

If you constantly want a new car, want it under warranty, and don't mind having a car payment, then consider leasing...if of course you have earned the right to choose. If you have a ton of debt, several other monthly payment obligations, and you don't know what the level of your financial stability will be in the near future, then you gotta stick with the car you have.

The reality is that, in a vacuum, you shouldn't lease. The down payment plus the renting plus the constant payments equals generally not a good idea. But we don't live in a vacuum. I don't think that leasing makes financial sense. But having helped thousands of people over the last 14 years, I know that "it doesn't make financial sense" isn't always the divine directive that it should be. I can tell you that it doesn't make financial sense, but if you value a low monthly payment, a relatively new car, and a car that's consistently under warranty, do you really think that I'm going to convince you to not lease with a simple "it doesn't make financial sense?"

I don't think you should eat red meat. I don't think you should smoke. I don't think that you should use recreational narcotics. So what am I supposed to do, say screw you and wish you luck? No. I need to help you operate your financial life within the constraints of your lifestyle preferences. It's the financial abstinence conversation. I'm never going to convince you that not driving a new car is better than driving a new car. It's not going to happen. Therefore my solution is simple: earn the right to make the decision. If you don't earn the right, via sound financial principles, then you don't get to indulge your preferences.

So it looks like this. If I got to choose your car acquisition method, then I would choose the following in order:

1. Pay cash for a used car.

1. Pay cash for a new car.

1. Buy a used car with a loan.

1. Buy a new car with a loan.

1. Lease a new car.

1. Don't ever lease a used car.

This list is based on what I value in a vehicle. It also happens to make the most financial sense. But if you value different things in a vehicle, then just be smart. Earn the right to indulge your preferences. Otherwise, you will be forced to drive what you are driving for much longer than you want to drive it.