Buy vs. Lease: The Honest Truth

Key Takeaways

• Default Rule: Buying and holding for 10+ years is almost always cheaper than leasing.
• What is a Lease?: You are renting the car for its most expensive years (highest depreciation).
• The Exception: Leasing can make sense for business owners (tax deduction) or those who must drive a new car every 3 years.

Introduction

Americans love cars, and they love debt. Leasing feels like a hack: "I can drive a BMW for $500/month? Sign me up!" But car salesmen push leases for a reason: they are incredibly profitable for the dealer.

Deep Dive: Renting a Lifestyle

The Math of Ownership

Let's compare over a 10-year period.

Scenario A: The Lease Cycle You lease a $50,000 car for 3 years. Payment: $700/mo. After 3 years, you return it and lease another.

• Total Cost over 10 years: $700 * 120 months = $84,000.
• Asset Value at end: $0. (You own nothing).

Scenario B: Buy and Hold You buy the $50,000 car. Payment: $900/mo for 5 years.

• Years 1-5: You pay $54,000 total (price + interest).
• Years 6-10: You pay $0. (Maybe $1,500/yr in repairs).
• Total Cost over 10 years: ~$62,000.
• Asset Value at end: The car is still worth ~$10,000.
• Net Cost: $52,000.

The Difference: Buying saved you $32,000. That's $32k you could have invested.

When Leasing Makes Sense

1. Business Owners: You can deduct the lease payment as a business expense. (Consult your CPA).
2. EVs (Maybe): Technology changes so fast you might not want to own the battery long-term.
3. Convenience: You hate repairs and willing to pay a premium to never visit a mechanic.

Summary

Leasing is the most expensive way to operate a vehicle. If you want wealth, buy a reliable car (used is best) and drive it until the wheels fall off.