One of the things I like about running a personal finance blog is that it provides me with the opportunity to write out my thoughts while working through a real life problem. I have done this a few times over the years with quick examples being whether to purchase a rental property and whether to put solar on my home. Right now, I am trying to figure out whether 1) should I lease or buy my next car, and 2) if I buy what kind of car should I buy.
From the age of 17 to about 35 years old I had just two cars. My first car was a 1993 240sx that I got in 1999 at the age of 17. That car took a lot of beatings, but took me through college, through law school and then finally died in November of 2006. After that, I bought a barely used 9,000 mile Mitsubishi Gallant (side note reading my old post on the topic, I can’t believe I was paying 13% interest that was then reduced to 9% before landing on about 6%!). I drove that car from 2006 until August 2016. The car treated me well needing next to zero repairs, but it was getting up there in miles and I was feeling the lack of technological advances we all saw over those 10 years (rear camera, Bluetooth, etc).
It was at this point I leased my first car. I know that is a taboo subject when it comes to personal finance bloggers since it is basically renting a car for 3 years. The Wife always leased so I watched her getting a new car every 3 years and I wanted to partake in the process and fun. I traded in that still running, paid off Mitsu and leased myself a Lexus IS 300 for $400/mo (and the car as a down payment). Well that lease is up and now I sit wondering if I want to Lease vs Buy my next car.
Leasing versus Buying My Next Car
The two massive positives that I received were that I had almost no worries that something was going to go wrong that wouldn’t be covered in the first 36 months, and I got to drive a new car that I really enjoyed. Notwithstanding those two pros, as I come to the end of the lease I am going to say that I am actually bothered that I will have paid $14,400 ($400*36) plus the value of my still running car, and as of August 1st, 2019 I will own nothing. There is no corresponding asset on the balance sheet regardless of how much it may have depreciated.
If I stay on this hamster wheel, I will just be responsible for another ongoing bill that will beget another bill and that cycle is never ending. On the other side, if I stay on that hamster wheel of leasing then I can keep myself out of the mercy of mechanics who seem just to make shit up to fix!
While I believe that some people (including myself) need a nice-ish car, I don’t think it has to be a new one every 3 years to get that affect. Similarly, I don’t think I am the type of person that needs a new car every 3 years as evidenced by the fact that I have only “done” that once.
As I write this post and get my thoughts out there in the world, I am going to buy my next car.
The money I spent would have nearly paid off a very nice $20,000 off lease car that will still may have value.
What Type of Car I am Going to Buy Next
As is my nature I have been researching this topic ad nauseam and forcing The Wife and friends to listen to my random and ever changing thoughts on the topic. During my research I was shocked to find how much luxury autos depreciate once they are off lease, only to stabilize later in their life. If you are so inclined there is a ridiculous amount of data on UsedFirst.
For a factor of reasons (I want Android Auto, I want a body style that was just changed, tech is important to me but the suspension is not, etc.) I think I have narrowed it down to a few cars that I will continue to look at:
- Small Car – A4 (2017+ w/virtual console), Q50 (2017+ cheap to fix) and the ATS (love that hard look). These cars are on the less expensive side, and truth be told I enjoy driving smaller cars, however, my kids have said something when they compare it The Wife’s SUV. I don’t like the inside of the C-Class but love the way it looks from the outside, I have a feeling they are going to update the IS soon so I don’t want to buy it right now.
- Mid Sized – This is really where I was shocked with my research. You are talking about 50%+ depreciation just after 3 years! I like the E-Class 2017+ but that may not depreciate enough before the time I need to get a car, but that model and onward was just redone. I also like the CTS. The A6 follows that depreciation line but it was redone in 2019.
So, as you can tell I haven’t exactly narrowed it down in terms of model but it is an important decision since I am hoping to keep whatever I PURCHASE for the next 6 to 8 years!