Buy car vs lease vs long term rent for 10 years period
If you plan to keep this asset for ten years then you can take the deprecation of its cost over that time period. For simplicity lets treat that as 120 monthly payments. So at a purchase price of $60,000 you are committing around $500 per month not including vehicle maintenance. I typically allocate around 20 percent of the purchase price of my vehicles for future maintenance costs. Since you have the cash to purchase this outright you have an option not afforded to most people. This adds for additional consideration. Here is an example.  You purchase a $60,000 car and put $10,000 down. You finance $50,000 at 2.84% over 60 months. Your total finance cost is $53,693 if you do not miss any payments. The question here is can you make more than $3,693 on the $50,000 that you would retain in this situation over a five year period? I know that I most certainly can and is an excellent example of why I finance my vehicles. Obviously this all goes out the window if you do not have the credit for top rates.  I have also negotiated a vehicle maintenance plan with the dealership at the time of my vehicle purchases. Most dealerships offer this service, the key here is negotiating. On my last truck I was able to get an all inclusive maintenance policy for 72 months for 8% of the purchase price. Your mileage will vary with manufacturer and dealership. As described in the comments above it is never beneficial for an individual to lease. You end up paying more for the newer models. I consider that to be a lifestyle choice as it is most certainly not a sound financial decision. "This question has been asked and answered before. Financially, owning a car will be more economical than leasing one in most cases. The reason for this is that leasing arrangements are designed to make a profit for the leasing company over and above the value of the car. A leasing company that does not profit off their customers will not be in business for long. This is a zero-sum game and the leasing customer is the loser. The lion's share of the customer losses are in maintenance and in the event of an accident or other damage. In both cases, leasing arrangements are designed to make a large profit for the owner. The average customer assumes they will never get into an accident and they underestimate the losses they will take on the maintenance. For example, if both oxygen sensors need to be replaced and it would have cost you $800 to replace them yourself, but the leasing company charges you $1200, then BOOM! you just lost $400. If the car is totaled, the customer will lose many thousands of dollars. Leasing contracts are designed to make money for the owner, not the customer. Another way leasing agents make money is on ""required maintenance"". Most leasing contracts require the leasor to perform ""required"" maintenance, oil changes, tire rotations, etc. Also, with newer cars manufacturers recalls are common. Those are required as well. Nearly nobody does this maintenance correctly. This gives the agent the excuse to charge the customer thousands of dollars when the vehicle is returned. Bills of $4000 to $6000 on a 3 year lease for failure to perform required maintenance are common. Its items like this that allow the leasing agent to get a profit on what looks like a ""good deal"" when the customer walked in the door 3 years previously. The advantage of leasing is that it costs less up front and it is more convenient to switch to a different car because you don't have to sell the car."
"Does your planning include contingencies for Can you afford the late fees, insurance increases, bad credit hits and all the other downsides when this goes bad? Why does she NEED a new car on lease? Personally? I'd go for option B) Do what it takes to have her OWN a car. Why not just have her get a car that costs IN ENTIRE the $3k that would be used for a down payment on a lease? Maybe add a bit of your own money ""for old times sake"" to the pile? Or a small loan to get to where she can get a usable, dependable car? Say, a $3-5k loan in your name that she's responsible for the payments. $3-10k can get a very dependable old car. 10 great cars for 6k or less Everyone else has been burned by her - for whatever reason. No idea what the reasons are, but she seems to be unable to pay her bills. Why would this time be any different? Your name on a car + someone who can't pay bills = a bad proposition. I would LOVE to help anyone who's been important in my life. Including MY x-wife. But I wouldn't agree to this deal unless I KNEW that I could 100% cover the costs when things go bad - because at this point, odds are they will." "I'd probably say ""buy"" for most situations. Unless you have a long-term lease, you're going to be saddled with elastic/rising rents if the market tightens up, while with a purchase you usually have fixed expenses (with the exception of property taxes/condo fees) and you are gaining equity. As I've gotten older, the prospect of moving is more and more daunting. The prospect of being essentially kicked out of my home when the landlord decides to sell the property or raise the rent is a turn-off to me." You should never buy anything that consumes all of your savings. First you should have 6 months living expenses in a liquid account. Second you should be investing for retirement, index funds or ETFs. The longer you have money invested the better off you'll be.  Pragmatically speaking you're better off getting the cheapest car that is reliable. Cars cost money, depreciation and money, every day you own them. However I get the urge to splurge. Get a loan, pay 2x the standard payment amount. In a perfect world scenario you would get a car 2-5 years old that has very little mileage.  One of the long standing archaic rules of the car world is that age trumps mileage.  This was a good rule when any idiot could roll back an odometer. Chances are now that if you rolled your odometer back the car was serviced somewhere, had inspection or whatever and it is on a report.  If seller was found to do this they could face jail time and obviously now their car is almost worthless. Why do I mention this?  Because you can take a look at 2011 cars.  Those with 20K miles go for just a little more than those with 100K miles.   As an owner you will start incurring heavy maintenance costs around 100K on most newer cars. By buying cars with lower mileage, keeping them for a year or two, and reselling them before they get up in miles, you can stay in that magic area where you can drive a pretty good car for $200-300 a month.  Note that this takes work on both the buying and selling side and you often need cash to get these cars (dealers are good about siphoning really good used cars to employees/friends).   This is a great strategy for keeping costs down and car value up but obviously a lot of people try to do this and it takes work and you have to be willing to settle sometimes on a car that is fine, but not exactly what you want. As for leasing this really gets into three main components: If you are going to do EVERYTHING at a dealership and you want something new or newish you might as well lease.  At least then you can shop around for apples to apples.  The problem with buying a new/used car from the dealers in perpetuity isn't the buying process.  It is the fact that they will screw you on the trade-in.  A car that books for 20K may trade-in for 17K.  Even if the dealer says they are giving you 20K, then they make you pay list price for the car.   I have many many times negotiated a price of a car and then wife brought in our car separately and I can count on ZERO fingers how many times that the dealership honored both sides of the negotiations.  Not only did they not honor them but most refused to talk with us after they found out.   With a lease you don't have to worry about losing this money in the negotiations.  You might pay a little extra (or not since you can shop around) but after the lease you wash your hands of the car.   The one caveat to this is the high-end market.  When you are talking your Acura, Mercedes, Lexus... It is probably better to buy and trade in every couple years.  You lose too much equity by leasing, where it won't cover the trade-in gap and cost of your money being elsewhere.  I have a friend that does this and gets a slightly better car every 2-3 years with same monthly payment.   Another factor to consider is the price of a car.  If your car will be worth over $15K at time of sale you are going to have a hard time selling it by owner.  When amounts get this high people often need financing.  Yes they can get personal financing but most people are too lazy to do this.  So the number of used car buyers on let's say craigslist are way way fewer as you start getting over $10-12K and I have found $15K to be kind of that magic amount.   The pro-buy-used side is easy.  Aim for those cars around $12-18K that are out there (and many still under warranty).  These owners will have issues finding cash buyers.  They will drop prices somewhere between book price and dealer trade-in.  In lucky cases where they need cash maybe below dealer trade-in.  And remember these sellers aren't dealing with 100s let alone 10 buyers.  You drive the car for 3-4 years.  Maybe it is $7-10K.  But now you will get much much closer to book price because there will be far more buyers in this range. "You are still paying a heavy price for the 'instant gratification' of driving (renting) a brand-new car that you will not own at the end of the terms. It is not a good idea in your case, since this luxury expense sounds like a large amount of money for you.  Edited to better answer question The most cost effective solution: Purchase a $2000 car now. Place the $300/mo payment aside for 3 years. Then, go buy a similar car that is 3 years old. You will have almost $10k in cash and probably will need minimal, if any, financing. Same as this answer from Pete: https://money.stackexchange.com/a/63079/40014 Does this plan seem like a reasonable way to proceed, or a big mistake? ""Reasonable"" is what you must decide. As the first paragraph states, you are paying a large expense to operate the vehicle. Whether you lease or buy, you are still paying this expense, especially from the depreciation on a new vehicle. It does not seem reasonable to pay for this luxury if the cost is significant to you. That said, it will probably not be a 'big mistake' that will destroy your finances, just not the best way to set yourself up for long-term success." The answer is very simple. Part of the luxury is having the cutting edge technology with the very latest features. The price premium is not just from increased build quality; it's simply a perception. Additionally, 10 years takes its toll on a car. The smooth suspension gets rougher over time, and all the little features start to break down. Part of the price of that car factors in the expense of expected repairs. That's true of every car, but the repairs are more expensive when there are lots of gadgets to break down, especially on imports. There are some who argue that you should lease an electric car. These factors are in addition to all the normal pros and cons of leasing vs. buying. The technology is still new and is advancing rapidly. In 2-3 years, the newer model may have significantly improved features, range, and efficiency, as well as lower prices. If you are the type of person to upgrade regularly to the latest and greatest, leasing can make it a smoother transition. It is hard to predict the depreciation of the vehicles. This is both because of the above factors, but also because these kinds of cars are newer and so the statistical models used to predict their future values are less refined. The models for predicting gas car prices have been honed for decades. EV Manufacturers have in the past made some mistakes in their residual value estimations. When you lease a car, you get essentially an option to buy the car at the future predicted residual value. If, at the end of the lease, the market value of the car is higher than the residual value, you can purchase the car at the predetermined price, making yourself some extra money. If the value is lower than the residual, you can return the car or renegotiate. I know a relatively large number of electric vehicle owners. Most or all of the ones who got the vehicle new leased it. The rest bought used vehicles coming off lease, which can also be a good deal. From strictly a gross revenue point of view, the parking spot is going to yield a higher rate (5.4%) versus a 3% savings account, assuming you have it rented all year. Your break-even point (not considering other expenses) is 7-8 months of rent per year. So, what are things to consider? Here's a few to start with. The parking spot is a nice investment in that you get a decent return, and the potential for appreciation. The savings account/CD will give you a fixed return with no risk.  To support your decision, make sure you understand all of the costs and understand all of the downside risk. If you're 50 and this is alot of money to you, be conservative. If you're 25 and have a good job, you can afford to chase the yield. If the car is in otherwise good shape, it's always less expensive to keep it longer. Think of it this way: you have to buy new tires no matter what. It's just a question of whether or not those new tires are attached to a new car or your current car. "The general answer is: ""it depends on how long you want to live there"". Here is a good calculator to figure it out: http://www.nytimes.com/interactive/business/buy-rent-calculator.html Basically, if you plan to move in a few years, then renting makes more sense.  It is a lot easier to move from an apartment when your lease is up versus selling a house, which can be subject to fluctuations in the real-estate market.  As an example, during the real estate bubble, a lot of ""young professional"" types bought condos and town homes instead of renting.  Now these people are married with kids, need to move somewhere bigger, but they can't get rid of their old place because they can't sell it for what they still owe.  If these people had rented for a few years, they would be in a better position financially.  (Many people fell for the mantra ""If you are renting, you are throwing your money away"", without looking at the long-term implications.) However, your question is a little unique, because you mentioned renting for the rest of your life, and putting the savings into an investment, which is a cool idea.  (Thinking outside the box, I like it.) I'm going to assume you mean ""rent the same place for many years"" versus ""moving around the country every few years"".  If you are staying in one place for a long time, I am going to say that buying a house is probably a better option.  Here's why: So what about investing?  Let's look at some numbers: So, based on the above, I say that buying a house is the way to go (as long as you plan to live in the same place for several years).  However, if you could find a better investment than the Dow, or if mortgage interest rates change drastically, things could tip in another direction. Addendum:  CrimsonX brought up a good point about the costs of owning a house (upkeep and property taxes), which I didn't mention above.  However, I don't think they change my answer.  If you rent, you are still paying those costs.  They are just hidden from you.  Your landlord pays the contractor or the tax man, and then you pay the landlord as part of your rent." If you are looking to build wealth, leasing is a bad idea.  But so is buying a new car.  All cars lose value once you buy them.  New cars lose anywhere between 30-60% of their value in the first 4 years of ownership. Buying a good quality, used car is the way to go if you are looking to build wealth.  And keeping the car for a while is also desirable.  Re-leasing every three years is no way to build wealth. The American Car Payment is probably the biggest factor holding many people back from building wealth.  Don't fall into the trap - buy a used car and drive it for as long as you can until the maintenance gets too pricey.  Then upgrade to a better used car, etc. If you cannot buy a car outright with cash, you cannot afford it.  Period. The first thing that strikes me is: Is this a time-limited offer? Because if you can expect the offer to still be valid in a few weeks, why not just wait that month (which will earn you the money) and buy the car then? The second thing you need to consider is obviously the risk that in the interim, there will be an actual emergency which would require the money that you no longer have. The third thing to consider is whether you need the car now. Do you require a car to get around and your current one is breaking down, perhaps even to the point that repairing it would cost you more than buying a new car and it is currently not safe to drive? If so, compare the cost of repairing to the cost of buying; if the difference is small, and the new car would be more likely to be reliable than the old car after spending the money, then it can make sense to buy a new car and perhaps sell the old one in its current condition to someone who likes to tinker. (Even if you only recover a few hundreds of dollars, that's still money that perhaps you wouldn't otherwise have.) The fourth thing I would consider, especially given the time frame involved, is: Can you get a loan to buy the new car? Even if the interest rate is high, one month's worth of interest expense won't set you back very far, and it will keep the money in your emergency fund for if there is an actual emergency in the weeks ahead. Doing so might be a better choice than to take the money out of the emergency fund, if you have the opportunity; save the emergency fund for when that opportunity does not exist. And of course, without knowing how much you earn, take care to not end up with a car that is no more reliable than what you have now. Without knowing how much you earn and what the car you have in mind would cost, it's hard to say anything for certain, but if the car you have in mind costs less than a month's worth of net pay for you, consider whether it's likely to be reliable. Maybe you are making an absolutely stellar pay and the car will be perfectly fine; but there's that risk. Running the car by a mechanic to have it briefly checked out before buying it may be a wise move, just to make sure that you don't end up with a large car repair expense in a few months when the transmission gives up, for example. When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate.  Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease. I have coworker who reported that he leased a Nissan Leaf from 2013-2016 and was offered $4000 off the contracted purchase price at the end of the lease due to a glut of other lessees turning in for a lease on the newest model with greater range.  It's not clear that this experience will be repeated by others three years from now, but there is enough uncertainty in the future electric car market that it's quite possible to have faster depreciation on a new vehicle than you might otherwise expect based on experience with conventional internal combustion powered vehicles. Leasing will remove that uncertainty. Purchasing a lease-return can also offer great value. I looked at the price for a lease return + a new battery with the extended range, and it was still significantly cheaper than buying a completely new vehicle. It's my understand that leasing is never the better overall deal, with the possible exception of a person who would otherwise buy a brand new car every 2 or 3 years, and does not drive a lot of miles. Note: in the case of a company car, Canadian taxes let you deduct the entire lease payment (which clearly has some principal in it) if you lease, while if you buy you can only deduct the interest, and must depreciate the car according to their schedule. This can make leasing more attractive to those buying a car through a corporation. I don't know if this applies in the US. The numbers you ran through in class presumably involved calculating the interest paid over the term of the loan. Can you not just redo the calculation using actual interest and lease numbers from a randomly chosen current car ad? I suspect if you do, you will discover leasing is still not the right choice.