06/06/2018
Most common question: Should I lease or buy?
In my opinion, leasing is the smartest way to go. (Side-note: I don’t get paid any different, whether you lease or purchase. So my opinion is not influenced by money.)
When you’re in a lease, you should drive it like you own it. If you get a scratch or door ding, fix it like you would if you owned it. If a headlight burns out, replace it like you would if you owned it. If you want to tint the windows, go ahead. Want to add a sub-woofer? No problem in a lease.
A lot of people say they’re scared of leasing because of the miles. Miles depreciate a vehicle whether you’re in a lease or not. Say you’re in a 72 month loan and you drive 20k miles/yr. Then after 3 years, you decide to trade it in. At that point you’ll have 60k miles and you’ll likely owe more than it’s worth. So you’ll have “negative equity” to roll over to the next loan.
Now let’s say you’re in a 3 year lease with 15k miles per year. After 2 years you realize you’ve driven 40k miles. That only leaves you with 5k miles for the remaining 12 months. So the advantage in a lease is this: As long as you’re getting into another lease, we can get you out of your lease 12 months early, as long as you haven’t gone over the lease term of 45k miles. Additionally, you have the option of buying your leased vehicle at a “wholesale” price that’s promised to you at the beginning of your lease.
So you have options in a lease. And on the financial side, you only pay sales tax on the portion that you’re leasing. Whereas in a purchase, you pay sales tax on the entire price of the vehicle. And if you trade in that vehicle after 3 years, you can only hope to get most of your money back. But you’ll never get the sales tax back that you paid at loan inception.
