Leasing Vs Buying A Car- Comparison & Financial Breakdown

Not much of an introduction is needed. This is not an article debating which is better. Both options carry their pros and cons; this is an article of me kindly doing the math so you don’t have to. My goal is to illustrate the financial comparison as well as the ulterior motive behind leasing and buying. Note before reading: I got these numbers for lease and purchase price off of Ford.com for the 2019 Ford Fiesta SE Sedan. The APR rate was added by me using a amortization calculator over a 5 and 3 year loan term with a 4.5% APR. Average APR for car loans is 3%. Now lets dive into this!

Car 2019 Ford Fiesta SE Sedan 200A 1.6L

Price Buy: MSRP 13,432 Lease: 199 for 36 months 1739 cash due at signing

A closer look at buying: Buying Terms: If you finance the Ford Fiesta at 13,432 with a 5 year loan payment and at 4.5% APR you are looking at total interest payment of 1,592.78 USD. Monthly payment would be around 250 dollars. Total Spent=15,024 USD. Buying terms option 2 : Second option, no APR financed directly thru Ford. Note that all dealerships do NOT have a 0% APR financing option. Monthly payment with 0% APR would be 223.8 USD per month. Total spent=13,432

A closer look at leasing: Total Down up front: 1,739 USD Monthly Payment: 199 for 36 months. Total Cost over 3 years: 7,164+1,739=8,903 USD.

For deeper analysis, lets run that 5yr loan as a 3yr loan: 3 year loan at 4.5% APR: Total interest=952 Monthly payments 36/months=399 Total paid after 3 years=14,384 3 year loan with no APR=13,432

Car Value After 3 Years: 7,790 Car Value After 5 Years: 5,372

Now lets crunch these numbers: Ok y’all still with me? So if you lease the car for 3 years and invest a total of 8,903 USD you get to drive a brand new car worry free for 3 years for an affordable 199 a month. If you purchase the car after 3 years you own the car for 399 a month. Notice it is twice the payment each month to purchase the vehicle. After three years the car is worth roughly(based off car depreciation calculator) 7,790. Leasing you have invested a total of 8,903 dollars; purchasing you have invested 14,384 dollars. If you purchased the car and sold it for its estimated worth of 7,790 your total loss is 6,594 USD(14,384-7,790=6,594). This means you are -6,594 USD when purchasing on a 3 year loan with 4.5% APR. Leasing set you back 8,903 USD(-8,903); this is 2,309 dollars more in debt than purchasing the car and selling it. Thus, based off of this example….you spent roughly 2,300 dollars less purchasing the vehicle! With a 4.5% APR and a 3 year loan you saved 2,300 purchasing it opposed to buying it. If you did an interest free loan you’d have saved roughly 3,200 purchasing the car(13,432-7,790=5,642) and selling it for 7,790 3 years after the purchase date. This is under the impression you sell the car at the estimated value above. Note you don’t have to go through trouble of selling car if you lease. Also, price you sell car for can vary.

Reasons to do both:

Lease: Leasing offers convenience. With leasing you are always driving a new car. Besides a few oil changes, you likely won’t put any money into the car. My uncle leases, and he certainly has the money to buy, he just prefers the simplicity and hassle free practice of leasing. New cars, reliable transport, no trouble. Keep in mind when leasing you don’t have to worry about selling your car after some years; you just turn it in and lease another BRAND NEW CAR. If you lease a car ask for no payment up front, tell them you are not willing to put anything down up front. If your credit is good they should work with you. Leasing a car does build your credit.

Purchase: Purchases are more practical for people who want to invest in their car. Note that cars are poor investments because they depreciate so fast. With that said, once you start making payments on your car you have equity in your car. After 3 years you may not want to sell it for a new car; you may be like me and drive that sucker until the dash reads 250,000. I have a ten year old Taurus and it drives like a charm, it’s still worth around 7,000 USD and it was purchased 3 years ago at 10,000 USD. If you are concerned about the long term investment: find a reliable(brand), one owner, used car with about 30,000 miles that is still under warranty. Purchase that car at a low price(thanks to depreciation) and take good care of it and drive it for 5-7 years and sell/trade when it is still worth thousands of dollars.

Thoughts: What do y’all think? Do you buy or lease? Comment below. Let me know your experience. Be sure to click my Amazon.com links next time you shop and support my page. The colored boxes will lead you to a product on Amazon. Please view my other articles, if you liked this, you will like my other content as well. Be sure to follow to stay up to date on my posts! I appreciate it everyone! -Andrew A.

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