Dear Pete,
I always like your advice!
I recently totaled a vehicle and my insurance company paid it off and gave me a check for $4,800. Also, I changed jobs three months ago taking me from a position that put many miles on my personal vehicle to 40 miles to work and back every day. In the past, I would buy fun vehicles because I spent hours on the road. Now I’m at a point where I can lease because I don’t put a lot of miles on my vehicle and I don’t have to have a fun car. My research on lease versus own hasn’t given me a lot of information on which is better, or even what criteria I should use to decide. Any help you can provide would be appreciated!
Thanks,
Luke
Hey Luke,
A “fun” car? Is that a thing?
Regardless, I don’t have enough info about your situation to say specifically which is best for you, but I can give you the criteria necessary to evaluate which option makes the most sense.
Leasing
Pros
– Allows you to switch vehicles every couple of years
– Renting a depreciating asset makes sense to a certain degree (though it doesn’t hold up to much scrutiny)
– Lease payments are generally pretty low which can really help an overloaded budget
Cons
– Mileage limitations
– Owning a vehicle is not the result
Buying
Pros
– You will at some point own the vehicle
– You will at some point own the vehicle and have no car payment
Cons
– You will be “stuck” with the same vehicle for the foreseeable future
– Car payments are expensive and can overload your transportation budget
This is a simplistic list, but it touches on the most important aspect to consider, your budget. I highly recommend spending no more than 15% of your monthly take home pay on transportation. This includes gas, insurance, car payment, maintenance, etc. If a traditional car payment is going to push you way over 15% it may not make sense for your current situation. Especially if you are trying to pay off major debt. I like to think of leasing as a temporary solution. Take 2-3 years to pay off major debt while leasing, then focus on saving for a car you can pay for on your own.
If you are looking for super distilled criteria this is it. Spend no more than 15% of your take-home pay on transportation. There you go.

Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.