ACCOUNTANT EXPLAINS Should You Buy, Finance or Lease a New Car

I did a similar analysis when I considered how to purchase a new car. In the end, I chose to purchase the least expensive car that met my needs and was reliable. I didn't buy a luxury vehicle. I didn't get the highest trim level (even though I wanted it.) I paid in cash and love not having a monthly payment. For me there is a lot of psychological value to not having the weight of debt. As much as possible, I try to live a debt free life. It may seem unsophisticated, but I sleep well.

We can absolutely go back and forth about what rates and costs are realistic, but the great value here is the analysis, the takeaways, that allow us to figure out for ourselves and our realities what is the best choice. Very excellent video! Thank you for making it.

1.99% is pretty unrealistic for most people who are financing. Extremely rare. 3%-4% is already a very solid/good rate for most people. Just avoiding 5%-8% interest for most people is the goal, if possible.

When leasing a car you partially pay for sale tax because it is usually based on the amount of each rental or lease payment. In the case of $48486 Wrangler purchasing sale tax is $5196, but you would pay around 50-60% of $5196, $2598 to $3437 when leasing. Overall, cost incurred is about $15000, less than $17132 as mentioned in the video.

Ex auto finance manager now certified financial planner here, good video. Some things to consider: if your car is owned outright or financed and you are in an accident and repaired, the accelerated depreciation will be borne by the owner. If it’s leased that is borne by the leasing company as the residual is guaranteed on a closed end lease. Also pay attention to residual values, if the residual value is higher than you think the car will be worth at lease end, consider leasing. Also if you are using the car solely for business then the whole lease payment will be tax deductible up until the maximum of about 900 per month. If it’s owned you will be able to deduct interest costs and depreciation logging kms used for business

WHERE DID YOU SEE 1.99% APR FOR FINANCING?!?!??!?! I haven't seen that ANYWHERE.

Lease vs financing depends on your finances and the brand/ model car. Some dealerships allow you to lease cars for 48+ months, and offer a maintenance package so you don’t have to worry about car troubles. Personally, I prefer to lease luxury cars, and buy low maintenance cars.

Not sure if this was included in your lease calculations but on-road running costs, maintenance, registration, road side assistance etc are all covered in the monthly instalment so that's a benefit worth noting. Also, in Australia we have GST (Goods and Services Tax) and the lease excludes GST so calculations for Australians would be different since the price of the car is lower.

Great comparison on 36-month timeline costs. However, if you extend out the length of time (48+ months) lease vs ownership, the numbers will greatly skew toward ownership.

lease Germans and finance/buyout Japanese cars 🙃

Cool to see the various scenarios here. It would have been fun to see a few real world examples in the sense that most people financing don’t have perfect credit and won’t get that 1.99% rate. Additionally, most people finance their cars for 5-6 years now. It would be beneficial to show people how drastically these change the cost of ownership numbers.

Also, most leasing agreement has a buyout option. So if your lease residual value is lower than actual value, it's best to buy it out at the end of lease. Also, all the cons you listed for leasing, such as the mileage, mod requirements would be no issue if you buy it out.

I haven't had a car payment for several years, and it feels amazing

Great video... my only issue is that you're comparing 36 month leases to 36 month loans. Almost no one does 36 month loans. Run it again with a 72 month loan at 4.99% interest. Financing is still cheaper than leasing most of the time, but leasing is less hassle on the back end, just turn it in and move on.

This is a great breakdown, I would add one thing. The opportunity cost will always be more than the interest amount for finance. The interest rate on finance is calculated on a depreciating balance, whereas the interest earning potential should be calculated on an appreciating/compounding balance. I know it's more complicated, but I have seen circumstances where interest rates on earning can be half that of finance rates and the customer still earns more than they pay over the same length of time.

Simple fix is... just make more money.

It really comes down to what condition of car you need, and your personal situation. Older reliable car bought outright is always best. But if you need a specific model and year finance. If you need to keep up with having a new car lease. Its that simple.

Pay cash for a reliable car. Use the $ you save for investing, etc.

I just have to applaud your content ma’am, well done. I remember having a consultation with a financial analyst last August, and it was incredibly insightful. Can’t stress enough how helpful experts in this field are!

As a cpa and cfp, great analysis. In reality most car buyers are so confused, purchase is an emotional purchase not rational. The seller wants confusion.