Should You Buy or Lease a Car?

 

Charts like this one below are common at car dealerships and other places. I haven’t leased a car or financed one in over 12 years. Taking a contrarian view against the only two options often listed, here’s my car cost example:

2005 BMW X3 Purchase Price $20,000 cash. (Purchased used from the owner of a BMW service shop it was his personal vehicle.) It had 30,000 miles on it, 2008.

Annual maintenance & repairs averaged $300 a year.

Private Party resale value now, $5,000

Cost per year if I were to sell it today:

$20,000

+$3,600 maintenance

-$5,000 resale value

$18,600 /12 years

$1,550 a year or $129 a month.

Of course, there is an opportunity cost if the $20,000 had been invested in something else, but with the stock market corrections and low-interest rates of 2% that cost is negligible, especially with the factor of the monthly payment of savings per month invested.  My experience is general, but there is a risk of a lemon or expensive repair issues possible, but not likely in a fine brand with exceptional reputation & maintenance.

Now my plan is to drive it another 4 years and then let my daughter use it when she turns 16. It still looks new and has a current body style. It might not in 4 more years.

So let’s assume I save $5,000 from NOT buying another car the same as the resale value of it for her to drive. Also, assume ist runs the 400,000 miles expected for this make and model with exceptional maintenance.  (Currently, at year 8 it is at about 150,000 miles.)

Then the cost per year in another 4 years will be:

$1,237 a year over 12 years or about $100 a month, with giving it to my daughter to drive in the 12th year.

So while financing and leasing are good options, buying a vehicle brand known for their longevity, slightly used, and well maintained may save much more of your money in the very long run, about $2,400 if leased for example, over 12 years, that’s about $28,800! Even financed, it is significant enough savings for me to drive the same car over the 12 years.

I have a second car, another BMW, a 1997 Z3 Roadster model. i bought slightly used as well. It has about the same 150,000 miles on it. That sports car still looks & runs great, a classic now, no major issues, the numbers for it show even more savings than my example! I asked my car maintenance company when should I sell it? Wanting to know when it may start having serious mechanical issues. He asked me my age and the mileage, then said, it will outlast me!