What The Research Says
- You should lease rather than buy if you drive less than <15,000, are interested in owning a new car every few years, can use the cash for better investments, and are relatively stable.
- If you run a business and use your car for it, you can deduct a portion of your lease payments from your taxes making it even more attractive.
- You should lease or finance a vehicle if you live far away from your work, have limited public transportation options, or value the flexibility and convenience of car ownership; otherwise, parking, maintenance and gas costs might make car ownership unattractive.
- Buying cash makes sense if the investment opportunities available to you now are less valuable than the cost you would pay financing the car.
- Remember to include maintenance and fuel in the cost of owning a car.
- If you lease a car look into gap insurance to cover costs if the car is stolen or totaled.
References
- How Much Car Can I Afford? (Edmunds)
- Lease or Buy a Car Calculator (Smart Money)
- Fuel Cost Calculator (Department of Energy)
- Calculate Your Savings By Riding Public Transportation (American Public Transportation Association)
The Choices
No Car / Public Transportation – Car? What’s a car? Isn’t that what fixy bikes and bus passes were made for?
Score: +1 Risk
Cash – You have decided that no matter how much chipped paint you have to touch over and mufflers you have to duct tape back on you refuse to make a car payment.
Score: -1 Wealth
Lease or Finance – You understand that driving a really cool car now is worth all the Ramen noodles in the world later.
Score: -1 Wealth