5 Reasons we’ll never lease again!
It’s about that time! Our car lease is finally coming to an end, and we need to find a new vehicle. Renée had leased a car back in 2011 before we were married. So, when her lease came to an end three years ago, we were faced with the decision to either buy with cash, finance, or lease a car. Well, that May we decided to lease again, a decision we deeply regretted by October when we realized that we no longer wanted to live in debt.
Over the last three years, we’ve made tremendous strides in paying down our student loan debts. Now that we have the opportunity to get rid of this lease, not only are we relieved, but we are excited to get that debt off our table! We’ve decided that the next car we get will not be leased or even financed; we’re going in with cash, baby!
Yes, you read right – all cash! By no means was this a flash decision. We had to plan and save for this moment over the last three years. After realizing in October of 2014 that we no longer wanted to lease, we put aside the equivalent of our lease payment in savings. So, whenever we paid the leasing company, we put aside the same amount every single month.
No Lease? No Finance? Are you nuts?
You’re probably asking yourself why we no longer want to lease and why we wouldn’t consider financing a car. Well… Shame on us as two people who have received their MBAs, not to have picked up on this long ago! Here are five reasons we’ll never lease or finance again:
- Depreciation. A car depreciates in value as soon as you drive it off the lot. Leasing a car literally and figuratively drives the most value out of the car (usually the first three years) without giving the driver the benefit of owning it in the end. Only if you’re willing to pay some jacked up price to keep the car will it be yours to keep. Leasing is just a less expensive way of renting a car long-term.
- Paying more than value. Financing a car is definitely out of the question! Most finances come with interest. Interest means that you will eventually pay a higher amount than the price for a car who’s value is less than when you bought it. It’s no big surprise when people say they are “under water” with a car that they want to sell 2-3 years after possessing it. Having to bring money to the table to sell a car is just absurd! Also, notice we said “possessing it” and not “owning it”. The bank owns that car until you pay the price plus interest.
- Insurance costs. When the bank owns your car (i.e. lease or finance), you are required to have full coverage. When you own your car outright, you have the option of liability coverage which is way less expensive.
- Totaling a car. In 2013, Consumer Reports stated 84.5% of new car owners either leased or financed. Assuming this is true, and likely higher four years later, it stands to reason that a large percentage of cars that get totaled in an accident are leased or financed. By Renée’s experience with totaling a financed car (before she leased one), even having full coverage did not pay everything that she owed on the car. So, not only was she paying off a car she was no longer driving, she was also paying towards the new lease. Not convenient!
- Affordability. We are of the belief that if you can’t pay cash for something whose value will definitely depreciate, then you probably can’t afford it. We saved up some cash to buy a modest pre-owned car (Nii wants a Tesla, but that ain’t happenin’ any time soon! LOL!) because that’s what we can afford. By owning our car outright, we avoid many of the issues outlined above, and that’s good enough for us.
We recognize that not everyone subscribes to this approach. But, if you are even questioning whether you should buy with cash, finance, or lease, here’s some information that you can use to make the best decision for your lifestyle. Good luck and drive safe!
We’d love to hear your thoughts on buying with cash, financing and leasing! Leave us a question or comment below!