Car Lease Saves Budget…?
August 25, 2009 by: Dave Ozment
Recently a reader commented on his grand plan to remove some uncertainly from his monthly budget process. On the surface, and when introduced this way, it sounds like a good idea and something worthy of a second look. However, that extra moment of review was at once comical and revolting, at least to my budgetary tastes.
Now this article is not intended to blast a reader. Only on a couple rare instances have I been so motivated and never have I followed through. Actually I enjoy comments regardless of their level of agreement or disagreement. Provided the opinions are authentic and civil, I revel in you taking the time to react and will try to do my best to facilitate the dialogue. So in that way, this article is more tribute and expansion on my comment response, even if I disagree with this reader’s specific way of thinking.
The original article was on a car my wife and I owned a couple months ago. We had named the car “Green Bean” and it was our ‘get-out-of-debt-car’ and its looks and functionality were about what you’d expect given that introduction.
The philosophy in owning this car was to minimize our monthly car expenses. The car was paid for and aside from normal auto expenses (gas, insurance, oil changes) we knew to expect a repair or two each year. Therefore, we knew to (and how to) budget for those unplanned but expected expenses.
This approach to our car situation – rather than toting a monthly car note – allowed us to plow a couple hundred extra dollars into our debt snowball each month as we aspired and progressed towards our goal of financial freedom.
And here is about where our paths, my reader and I, began to diverge. We both expressed agreement in wanting out of debt and we both attempted to progress this path by driving older paid-for cars. We both experienced the associated repairs…. and we then went our separate ways.
I socked away a few extra dollars each month, was diligent (if not obsessive) in my preventive maintenance routines, and redirected my snowball payments if a repair was required.
My valued reader, on the other hand, leased a luxury automobile.
Suddenly his car was HOT and mine smoked due to a small oil leak.
But I believe there exists a leak in his logic. Predictable expenses and budget balancing was one of his primary factors in assuming a $400 monthly multi-year obligation. I suppose Kia’s lease payments are not as linear as BMW’s but even that is beside the point.
I felt his frustration when he lamented the expenses and inflated monthly cost of ownership. I know of what he speaks. But signing up for such a large payment solely for the sake of expense consistency is a losing proposition, and reeks of day old car fever.
Assume that lease-covered preventative maintenance balances the increased insurance costs and gas consumption remains the same – because who would want to drive more in the nicer car? – the prospect of returning to the dealer on a prescribed schedule is pure joy and driving a glorified rental is cool. Even if all that is true, which I doubt….
The prospect of making years’ worth of monthly payments for a car you’ll then have to return or finance to purchase is no-brainer bad. And having 20% of a new car’s value erode while driving off the lot is only mildly less debilitating, long term.
I speak strongly on this topic because my feelings (and frustrations) are of equal strength. I once purchased a new car, I know of what I speak.
So here’s my contemplated advice.
This reader, or that, would be better off ‘gaming’ their budget into a consistent flow rather than obligating thousands upon thousands of dollars in the name of balanced budget and predictable debt reduction schedules. Rather than pay a leasing company $400 a month, simply auto-draft the same dollars into savings and drive the beater another few months. The saved money could be used to service a repair, upgrade the beater, or payoff a debt if the “payments” were able to accrue.
Face it, $400/month is $4800 per year. If you’re spending that much money to maintain a $2000 car then your lug nuts are loose. Spend a couple hundred bucks to keep it mobile and in a couple more months upgrade your hoop-dy. Before you know it, you’ll be in a steady, even if not spectacular, car and you’ll be well on your way to debt freedom. You’ll gain genuine confidence with each progressive step towards success and you’ll develop a keen ability to slice through the drama used to justify excessive spending by many folks today.
Photo By: pavanarsinol111
Your Turn, let me have it! Heck, you may even inspire my next article!
Thanks for the article. There are too many people today who think leasing is good for some people and not for others. Leasing is good for no one, and the facts prove that. I love your example of $4800 per year in a lease vs. the comparable maintenance on a “Dave car”.
I just hit 210,000 miles on my 2000 Volvo. I probably spent around $1,800 on maintenance this year, but I’ve spent close to nothing in previous years, and the car is now back in perfect mechanical condition. I don’t understand how people can want the new shiny over the big, safe bank account. OR, the new shiny with NO payments.
To each his/her own.
Casey Friday´s last blog ..What’s Your Dream Get Off Your Ass And Go Get It
Dave, I’m with you. I know people that constantly trade in their cars every 3 years and never go without a car payment. Mr. Boomer and I keep our cars at least 12 -15 years until they are starting to cost us too much in maintenance.
That’s so right… when the car is paid off it’s time to get another one…. what? I want to enjoy not having a payment! The last couple cars I bought were done with cash and it was great to own a car and never have a payment. It’s been good to use this approach and still be able to slowly improve the quality of car over time as well. I think we now have a decent pair of cars and will be happy with them for several more years. It’s awesome to think about who much saved money that represents!
Dave
The picture is great! It reminds me of cars I have seen. Your logic is right on the money!
Buy used or go in debt and pay it off and keep up the repairs. I enjoy the travel of an automobile and open highway. Most of my vehicles are not the prettiest to look at it but they are mine just the same.
We all choose different lifestyles and “eye candy” to look at no matter the price tag. But how many people really look in depth to what they “waste” in income when they finance, when they rent, when they merely just toss their funds and materials to the wind?
I see all lifestyles who do it all, from rent, to lease, to purchasing the paid for? But if someone enjoys it and maintains their income lifestyle does it really impact others?
I believe so and that is the bigger question, you might want to consider is for input from others regarding their takes on car leases or owning older vehicles. I don’t think your article fully captured that. It’s more of facts, stats and figures, not the reality of your readers. You do a great job of offering facts and such but do you really want to know people’s input and perceptions? What about taking it a step further to get feedback and help correct a problem or even change the financial perception of things now and help others finances? The good and bad of leasing???
Personally, I think more American’s should consider what their lifestyle is, live within the financial cash means afforded to them and see how fast our government would progress in securing new changes of financial matters to us. Especially the auto industry, consider what vehicles cost 10 years ago to now and the bells and whistles added to them to make them nice…now consider the escalated prices?
Don’t you think if more people quit buying sub-standard items with their money, then the retail industry may consider really giving back with new inventions that we all could benefit from? I mean come on, most vehicles now a days don’t even get as many miles to the gallon as they did 10 years ago and what about the price of heating, electricity and not including internet and phone services? Does anyone really stop and think before they sign or purchase?
I didn’t, but I learned the hard way and it will carry in my financial future. Used is better, especially when it is paid for. We have the internet to teach us how to be our own repair person, so what excuse does anyone have not to try it? Just my thoughts of rambling on your blogs. It’s interesting dialogue! lol
Hey Cindy!
Glad you like the picture, I enjoyed that one myself.
I love cars but I’ve really learned to enjoy paying cash for them. Anytime you finance something, you are essentially giving away money. I enjoy my current cars even more today as they are all paid for and I owe nothing on them. I even think they drive better that way.
You also make good points on people voting with their dollars. If everyone stopped eating at McDonalds until they started to offer healthier foods then they’d become the heathiest restuarant in town very quickly. If we want change, then we need to act like it and not spend our money on the same things we complain about.
Finally, hey… I love hearing opinions and and perceptions from my readers. I think the comment section is the perfect place for that kind of feedback and discussion. I’m surprised you’d ask that question as you’ve been so free with your opinions and I’ve tried to answer each one.
Thanks for writing Cindy. I hope you’ll continue to share your thoughts with me and I invite you to share my site with others with whom you engage. If we all work together, perhaps we can bring about some positive changes.
Thanks.
Dave
Let me get this straight, the reader thought the consistency of a lease payment justified, the buying (leasing) of a newer ride? Did he understand that he was just “renting” it? He might as well have stood on his roof top and threw away $400 bucks a month. Like it’s raining money…. because it sure wasn’t going into his pocket or his debt snowball.
Hey Leah… yep, that about sums it up. Folks will sometimes allow an ounce of uncertainly to weave itself into a pound of drama. Rather than set some money aside for a potential car repair, some folks will live in fear of the breakdown and it’ll make them do foolish things. This guy wanted rid of the repair so much that he was willing to pay $400/month to do so… which is either dumb (in my opinion) or horrible excuse to massage car fever.
Thanks for commenting!
Dave
This may seem strange but I couldn’t see the image above, I am using FireFox 2. anyways, what I read was very good and I enjoyed it. I was thinking about print it out, do I have permission to do that?
Interesting… not sure why the picture didn’t show up….. Hey, if you subscribe to the email or RSS (they’re free) I bet you can see the image! ; )
I don’t mind you printing a copy of the article to share with others. In fact, I’d appreciate the publicity!
Thanks!
Dave