Financial Fundamentals – Buy or Lease your Car

Steve Lear |

By Kyle Berg, CFP®, BFA™

“Should I buy or lease my next car?”

This is a question we hear on a fairly regular basis. While everyone’s financial situation is different, there are some key takeaways to consider when you are looking for your next vehicle.

“What makes the most sense for me?”

The first thing you need to ask yourself, is what type of driver are you? Are you a “road warrior,” putting an above-average amount of miles on your vehicle year over year? If so, leasing may not be the best option for you. When you lease a car, you are limited on the miles you are able to drive. If you go over, you typically end up paying on a per-mile basis. But, if you are more of a typical commuter, and put between 10,000 and 12,000 miles on your vehicle a year, leasing may make sense for you.

Next, and this is probably where we can help the most, you need to consider your cash flow. One of the positives of leasing is that your payment will in most cases be lower than if you were to purchase the same car. Additionally, when buying a vehicle there is typically some sort of down payment or trade-in, to help lower the monthly payments. This up-front cost is not necessary for a lease, and in fact I would discourage it, due to the fact that if you were to total a leased vehicle you would not get your down payment back on the insurance claim. So, from a cash flow perspective, leasing may make sense for you.

Finally, you may want to consider safety. Leasing vehicles allows you to stay in the newest, and generally safest models. Car companies are coming out with innovative new safety features every year. By updating your vehicle, you are protecting yourself, as well as everyone else around you. If safety is a top priority when choosing a new vehicle, leasing may make sense for you.

“But I don’t like the idea of not owning something after all those payments...”

Now we’ve come to the elephant in the room – when you lease you do not actually own your vehicle. Not only can this put you in a cycle of always having a car payment, but some people simply don’t like the idea of not owning their vehicle. In that case, buying a car may make sense for you. But one last consideration – once you’ve decided to buy a car – remember that NEW cars lose about 10% of their value as soon as they’re driven off the lot. Personally, I don’t like the idea of owning an asset that is depreciating in value. Instead, consider buying a certified pre-owned vehicle. These are typically well-kept cars with the renewed warranties.

As I stated at the beginning, everyone’s financial situation is different. If you are in the market for a new vehicle and want help deciding if purchasing or leasing makes sense for you, please don’t hesitate to reach out to your Affiance Financial advisor.


There can be no assurance that the content made reference to directly or indirectly in this blog post will be suitable for your individual situation, or prove successful. Due to various factors, including changing conditions and/or applicable laws, the content is only reflective of current opinions or positions and is subject to change at any time and without notice. Moreover, you should not assume that any information contained in this blog post serves as the receipt of, or as a substitute for, personalized investment advice from Affiance Financial. Please remember to contact Affiance Financial if there are any changes in your personal/financial situation or investment objectives.