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So. What is a financially-minded lady or fella to do?

The painful truth is that if financial independence is your primary goal, your fastest course forward is to sell whatever car you are currently driving (or wait for your lease to expire) and use the money to buy a well-used vehicle that can get you where you need to go.

That is if you can’t use a bike as your primary mode of transportation (that’s a bicycle, not a motorbike). In this scenario, you’ll buy a $2,000-4,000 vehicle outright, then use the monthly payment you had been making and put that immediately into a savings account each month.

This account would grow with time and eventually be your emergency fund or the fund that will allow you to pay cash for a more reliable version of your gently-used car that may now remain yours for the next decade or so.

If you need to take a loan out for your $2,000-4,000 car, this just delays the formation and growth of your ‘next-car/emergency’ fund.

No worries, we all travel our own path.

Next, you will proceed to change the channel during vehicle commercials, avoid the car lots, and not ever think about buying a car again until you are either forced to do so or reach a closer proximity to financial independence.

The car will become a means of transportation only

But, much like a surfer treats the ocean with respect, you too will respect your vehicle. Change it’s oil, keep up on the breaks, tire rotations, and other ‘interesting’ noises. I never said that owning your own vehicle for a decade won’t have it’s share of repair work that comes with it (I’ve had my sedan for over 9 years now and it has been one of the best financial decisions we’ve made – ultra reliable and because we take good care of it, the Camry remains our road trip vehicle of choice).

Don’t come at me with the whole, “Repairs will cost more than the lease payment!” nonsense…

I’ll be conservative here. Like I said, we’ve had the Camry for 9 years and we average around $500/year in repair/maintenance costs. That’s 4 oil changes, the new breaks, tires, or random happenings that pop up.

If you got a steal of a deal on a lease and pay $250/month, you’d be averaging $3,000/year… And that’s not counting any oil changes or other maintenance issues that may or may not be covered under your lease.

If we get crazy for a minute and extrapolate: allow me to show you two scenarios.

A) You buy your 3-year-old Camry outright from a dealer (assuming 40,000 miles, good condition, and some of the bells and whistles). Right now, I’m seeing 2015 models for about $16,500 – easy. Add in our average of $500/year in maintenance/repair cost and we are at a total of $21,500 in a decade.

B) You get a ‘steal of a deal’ and make perpetual lease payments of $250/month on a brand new but similar vehicle. Even if you pay nothing at all for maintenance… You’re at $30,000 out of pocket. You make a more realistic payment for a car with similar features of $300/month and now you’re looking at $36,000 over your 10-year period.

Either way, you would be saving over $8,000 to buy a nice car in Scenario A, over the course of 10 years. $8,000 is $8,000. That’s a significant amount of money no matter how you slice it.

Given the above information, why did I lease a vehicle on 2 separate occasions

First time I leased a vehicle-

I made a rookie mistake and leased a brand new BMW 128i. I have no excuses and this was pre-financial blogger Mike. I wrote a story or two about the decision a while back and although I did meet Monica (my wife) while I had that car – she wouldn’t have recognized it from a Chevy Cavalier back then (that’s when we still had those…). The price for my first education in leasing… A mere $427/month… I know, I know. That’s $15,372 over the 3-year term and it was brutal. I ended up having to find someone to sublet it from me midway through the lease.

Second time we chose to lease-

It was September of 2012. We were recently-weds and Monica was just starting her third year of dental school. She had driven a ’00 Honda Accord up to this point that had been a hand-me-down but there were some critical issues coming up in the vehicle. It was starting to lose its ‘reliability’ luster and began breaking down on occasion.

With the long hours of dental school, the prospects of having her broken down very early in the morning or very late into the evening were all we needed in order to sell the vehicle. The other major variable to our financial situation at the time was dental school.

We were in hyper-frugal mode to dramatically reduce expenses and ultimately the debt we would need to take out for her to finish school. Because of this, there was no extensive emergency fund (think $1,000 total – Dave Ramsey style).

We took the minimal gains from the Honda, paired it with our emergency fund and started shopping.

There wasn’t much that eclipsed the Accord in terms of reliability. Big city concerns with a solo-traveling female weighed heavier on my mind, especially with my ‘protect this house/family’ instinct firing on all cylinders (recently-wed), so we went to a dealership and negotiated for 4 hours with the salesman.

We came away with a brand new Chevy Cruze at $179/month for 3 years. The $6,444 total for the lease was a price we were willing to pay so that Monica could drive a brand new and reliable vehicle to finish out dental school and start her professional career.

This cost was well worth it in our minds. Yes, we could’ve gone with the ultra-frugal route, but at that time we placed more value on reliability than cost savings when it came to transportation.

Conclusion

There is no absolute ‘right’ or ‘wrong’ to the lease conundrum, especially in our modern financial environment. People place value on different things at different times in their lives.

Of course, we can all calculate the total cost of ‘ownership’ (or lease-term) and weigh those values to determine which would be the most financially responsible option. We could talk about buying a beater and ‘driving it until the wheels fall off’ all the while stocking that ‘car payment’ away into a savings account so that we can pay cash for the next car, but not one of those calculations take into account the extraneous variables that shape our lives in the present moment.

Maybe you’re buying a car for your daughter that’s going off to college or maybe you’re a college student yourself that just needs to make it to campus then burn the thing down until summer break… Who knows? That’s the point.

You do you. And as long as you understand the variables and costs that shape your decisions, AND you chose responsibly (not my BMW situation), you will make the correct decision for YOU.

Thanks for reading!

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I’m glad you’re here. Thanks again and talk soon!

– Mike