When does leasing a car make sense?

Written by
Peter Dunn
unnamed (11)

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!



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.



- 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


- Mileage limitations

- Owning a vehicle is not the result



- You will at some point own the vehicle

- You will at some point own the vehicle and have no car payment


- 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.

(courtesy of WIBC)

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