jordi2r - stock.adobe.com 

Generally people buy cars by its appearance and style. I personally wanted to buy a M3, but I didn't value the cost of owning the car, maintenance, parts, and premium gas, despite the fact that I can buy the car outright.

We all got places to go. There are ample modes of transportation to get us around: personally owned vehicles, buses, rideshare, trains, motorcycle, bicycle, subway, trolley, taxi, tram, electric scooter, and so much more! But majority of us own at least one personal owned vehicle. According to U.S. Census Bureau 91.3% of household owns a car(s). But is it worth owning or even leasing a car? Owning or leasing a car could be financially detrimental to some folks. Not only can monthly auto payments and lease payments can cost people a good portion of their monthly payroll, but expenses like maintenance, repairs, gasoline, registration fees, licensing, insurance, tolls can also take a big bite out of their essential income. It is undeniable how much debt America is in auto loans, however, not every single American are in serious debt. For some, people are clearly financially stable, but millions are unaware how much their car(s) is really costing them. Do you know if your car is costing you a fortune? Is it worth the cost to own or lease a car or even not have the liability of having a car? That all depends on the individual. The travel commute from work to home. The budget. The location. There are many variables.

Is buying better than leasing? Or not even having a car? Again, It depends. It varies on the person’s budget, situation, and preferences. Also, in some rare cases some people may not even need a car. Personally, I would purchase a car when I can afford it upfront. In other words, buying it outright after saving enough to purchase the car is the best option, but that’s just me. You have much more equity when owning a vehicle. You have an asset that has some value. Even completing a 36-month lease term without trading, it has no equity and no trade-in value because it is not yours…it is the automakers. You can pay $15,000 in total lease payments and still wind up with absolutely nothing when the lease contract expires. However, automakers may offer you a buyout price after your contract expires, in which case the car will have a residual value which is the car’s worth that is determined by its condition, mileage, and age. It may be of value more or less; the automaker can tell you, and this might be a good time to negotiate! It would also be a good idea to set money off the side to purchase the leased vehicle, while paying your monthly lease payments. 

So how do you know what is right for you? Everyone has a different budget and a different personal preference, but one major indicator is your monthly income, calculate your budget to the car you want to buy. If you can afford to pay off an auto loan between 3 to 5 years, buying a car may be the best financial option for you. If you can’t afford your auto loan’s monthly payment, then leasing probably makes most sense. For example, let’s say you want to buy the lastest Honda Accord LX, the MSRP (manufacturer’s suggested retail price) is $28,295. For simplicity, let’s exclude taxes, interest, and fees and assume the total loan amount is the price you see as the MSRP. Divide $28,295 by 36 months and you get $785.97 per month for a 3-year term. If you can afford that every month, you can afford to buy the latest Honda Accord LX.

Car: Honda Accord LX
Cost: $28,295 (Divide the cost of car by the term to get  your monthly cost)
Term: 36 Months
Monthly cost: $785.97 (Doing simple math can give you transparent answers if you can afford it)

If you can’t afford that monthly payment, leasing it would be right for you. But again, it is vigilantly important that you can afford your lease payment as well. You can also check if you can afford a 5-year loan. Divide $28,295 by 60 months and you get $482.08 per month for 5 years. Obviously, the higher the cost of a car and longer the term, the more you will pay each month, so car preference could make all the difference in your budget. Of course, you have to consider taxes, fees, and most importantly how much interest your bank or the automaker financial group will charge. It is important you consider all these expenses and look over your budget to see if you can really afford financing a car or leasing it. If you are unable to purchase a car, perhaps monthly lease payments may be the best financial option for you. If you can buy a car upfront without taking a loan, that’s the best way to save money and give you more leverage to negotiate. However, if you don’t need a car then I wouldn’t buy one! It’s nice to travel and have that luxury to go places, but if you don’t need one I personally wouldn’t! I would rather save up.