Should I Lease Or Buy?

1. I have been thinking of purchasing a car. Should I lease or buy to own?

Let’s cut to the chase, buying a car using cash is the best way to go.

First, when you have your cash ready to purchase a car, you have eliminated the risk of having debt and the hassles that come with finding financing of a car. When using cash, the chances of purchasing only as much car as you can afford is high compared to leasing a car and financing in a buy to own situation.

lease or buy a car

Leasing doesn’t make mathematical sense. Consider these factors,

  1. Car companies and dealerships are in the business of making money. Therefore if they were leasing out a car at a loss that would be bad for business.
  2. Using estimates, if you lease a car at $500.00/month for 60 months, your total payments would be $30,000.
  3. Overtime, the car will lose value. At the time when the car is returned, the estimated market value may be $18,000 thus the car company has made a profit of $12,000 and they keep the car.
  4. The interest incurred when leasing a car is never disclosed because technically, you are not taking out a loan. You’re just renting the car.
  5. But if you buy to own, once the payments are complete, the car is yours.

To be fair, here are the advantages and disadvantages of both scenarios.


The potential advantages of leasing can be possible as having:

1. Lower Monthly Payments

2. Low or No Down Payment

3. More Car, More Often

4. Fewer Maintenance Headaches

5. Lower Up-front Cash Outlay

6. No Used-Car Hassles

7. Gap Coverage usually included.

If there are advantages, there are also disadvantages such as:

1. Early Termination Cost

2. No Ownership Equity

3. Excessive Mileage Charges

4. Excessive Wear-and-Tear Charges

Buy to own

Advantages of buy-to-own :

1.      Pride of ownership — you can modify your car as you please.

2.      Auto buying is more economical in the long run unless you buy and trade-in regularly.

3.      No penalty for driving excess mileage

4.      Increased flexibility — you can easily sell the car whenever you want

ii.      However, the disadvantages are:

1.      Higher down payment is generally required.

2.      Higher monthly payments

3.      You’re responsible for maintenance costs once the warranty expires.

4.      Trade-in or selling hassles when you’re ready to get rid of your car

5.      More of your ready cash is tied up in a car, which depreciates, rather than an investment that appreciates.

Purchase a car with cash, and only what you can afford according to your budget

2. How much should I spend on a car?

The rule of thumb is that all your automobiles/boats/bikes should add up to a third of your take home pay. It is wise not to invest too much in these items considering they depreciate in value.



About The Author

Keroy King

Keroy King is a Financial Educator, Podcast Host, Keynote Speaker & Empowerment Expert, residing in Los Angeles, California and the Founder of "Life Then Finance" a community where she coaches individuals to overcome personal and financial obstacles that are holding them back so they can quickly and effectively live a full-filled and purpose driven life. Even when they think the odds are stacked against them. She is also an online course creator & instructor of several personal finance and personal transformation online courses.


  • I saw something about this subject on TV last night. Nice article.