Personal Finance: Lease, New, or Used?

This week for personal finance I learned about, car loans and car payments, and owning a car part 1-2.

The main point was that car leases were by far the worst deal, that buying used was the best, and buying new, was second best.

When buying a car it is important to consider gas, maintenance/repair, insurance, taxes. Say you buy a car worth $25,000. Buying that car new would have a tax and maybe a loan, and it comes out at $28,000. Now a used car that is 3 years old, without any tax, and comes out to $20,000. And a leased car after 6 years of payments of $344 will come to $24,768.

I know I said that leasing is the worse, but there I just showed that it is cheaper. It is a 6-year plan of $344 a month, and it comes out to $24,768. But after that time you don’t have a car. There are also many restrictions, maybe there are mileage limits per year, and if you go over that there will be fees, you usually cant modify leased cars without breaking the agreement, there might be some tax advantages.

Whereas if you buy a car new for $28,000, you still have a 6-year-old car that is worth something. You could sell it after 6 years for $11,000, and be out $17,000. There are no restrictions.

With a used car, you buy one worth $20,000, then sell it after 6 years for $5,000, because it is now a 9-year-old car, and it will have cost $15,000.

All these numbers are figurative. There are other considerations, like tires and repair, which a lease might cover, but the more expensive insurance on a leased car offsets the repair. A used car would probably need more maintenance, but it would still be worth it for the price, as long as there are no major issues like transmission and/or engine replacements.

New cars would need the least maintenance.

Many cars new bought for $28,000 won’t be worth $11,000 after 6 years, while some might be worth more. These are just examples I made to prove a point.

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