Yahoo Finance The Money Guy Show: When Does It Make Sense To Lease a Car?
If you’re in the market for a new set of wheels, you’re likely debating your options. You may be considering purchasing an older vehicle or even leasing one. Some experts believe leasing cars is the most expensive way to finance a vehicle, but some business owners don’t mind leasing for tax reasons. The Money Guy Show recently shared a clip about leasing a car and whether it makes sense. Hosts Brian Preston and Bo Hanson gave their candid thoughts on leasing.
Check Out: 10 New Cars to Avoid Buying in 2024
Learn: How To Get $340 a Year in Cash Back – for Things You Already Buy
Does it ever make sense to lease a car? Here’s what The Money Guy Show had to say.
Sponsored: Owe the IRS $10K or more? Schedule a FREE consultation to see if you qualify for tax relief.
Does It Make Sense To Lease a Car?
The hosts confirmed that there had been rare scenarios where they advised an individual to lease a car instead of purchasing one outright or financing it. Here’s the main argument for leasing a vehicle.
See: 7 Best Cars for Retirees on a Budget
A Lease Makes Sense If You Don’t Want To Own the Same Vehicle for a Long Time
According to the hosts, leases are a financial crutch that can help make a bad financial decision — buying a new car when you don’t need one — slightly less bad.
They acknowledged that many people will struggle with owning one car for a long time and may want to switch up their ride more frequently. Since the depreciation of a new vehicle is rapid within the first three to four years, a lease would make sense if you keep trading in cars every few years. Sometimes, financial decisions aren’t the most logical ones, as long they make sense for your lifestyle and unique goals.
Instead of buying a new car every few years, you may want to look at leasing so that you’re not constantly losing money through depreciation. Leasing would also allow you to switch up your vehicle without dealing with the hassle of trying to buy and sell a vehicle.
As a business owner, you may even sometimes think about leasing for the sake of the tax benefits so that you have write-offs on your taxes. However, it’s worth mentioning that this doesn’t make it a wise financial decision for your personal finances.
Considerations for Leasing a Vehicle
The hosts mentioned that leasing a car is like having a boss, since there are rules that you have to follow. Every time you get into the vehicle, you have to remind yourself of your mileage allowance and the annual cap that you were given when you leased the car. This means you can’t drive as much as you would like without worrying about additional expenses.
You Have Mileage Limits
There are extra penalties or fees you might encounter with leasing, since there are limits on how much you can drive the vehicle. If you go over the allotted limits, you’ll have further expenses when you trade the car, or you may have to hand over the keys sooner than expected.
You May Drive More
The Money Guy Show hosts pointed out that, since you may end up leasing a nicer vehicle than you could afford to buy, you may drive more often — people will want to join you for the ride. From a social perspective, you don’t want to be stuck as the main driver in your group of friends.
You Have Another Monthly Expense
Another issue is that once you get a monthly payment, you have one additional month to expense to factor into your monthly budget. You also have nothing to show for the cost at the end of the term, since you can’t even sell the car. When setting up your budget, you may not want to add another hefty monthly expense to your overhead.
The Biggest Problem With Leasing
The biggest problem with leasing a car from a financial perspective is that owning cars for the longest period of time possible makes the most sense. The hosts want you to focus on reliable transportation. The goal is to hold on to one car as long as possible so that you don’t have to keep spending additional funds to get around.
Many people will lease because they want to drive a nicer car than they can afford. While this can be tempting, especially when you’re young and want to impress your friends, it doesn’t ultimately make financial sense.
Closing Thoughts
There are rare scenarios where it would make sense to lease a vehicle instead of purchasing one. Since automobiles depreciate quickly within the first few years, if you don’t want to drive the same vehicle for a long time, then a lease makes sense.
However, the hosts clearly mentioned that driving can be a financial burden and that leasing only exacerbates these expenses. As always, you’ll want to review the numbers to ensure that you make the decision that makes the most sense to you.
More From GOBankingRates
10 Expenses Most Likely To Drain Your Checking Account Each Month
This One Mistake Can Tank Your Credit Score 100 Points Instantly
This article originally appeared on GOBankingRates.com: The Money Guy Show: When Does It Make Sense To Lease a Car?
