Suze Orman: Why You Should Never Lease a Car
Written by
Elizabeth Constantineau, AI Editor
Edited by
Elizabeth Constantineau
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Choosing between leasing and buying a car is a common financial dilemma. Suze Orman, a renowned financial expert, firmly advises against leasing. She believes that while leasing may offer short-term convenience, it can be a financial trap in the long run. Read on to learn why buying a car, as opposed to leasing, could be a more prudent financial choice.
The Drawbacks of Leasing
Leasing a car might initially seem like a smart financial move due to lower monthly payments and the allure of driving a new car every few years. However, it comes with significant drawbacks.
Financial Constraints
Leasing a car often includes restrictions like mileage caps, which can incur costly fees if exceeded. Additionally, lessees may face charges for wear and tear, further increasing the cost.
Continuous Payments
Leasing perpetuates a cycle of never-ending payments. Unlike buying, where you eventually own the vehicle outright, leasing leaves you with no tangible asset after the lease term ends, leading to a continuous financial outlay.
Limited Freedom
Lease agreements often restrict how you can use and customize the car. Exceeding mileage limits or modifying the vehicle can lead to hefty penalties, limiting your freedom and usage.
The Benefits of Buying
Contrary to leasing, buying a car offers several long-term benefits that align with sound financial planning:
- Asset ownership: Purchasing a car means that once you’ve paid off the loan, the vehicle is yours. This ownership eliminates monthly payments and provides an asset that holds residual value, even as it depreciates.
- Cost-effectiveness: In the long term, owning a car can be more cost-effective than leasing. While the initial costs and monthly payments may be higher, the overall expenditure often turns out to be lower than the cumulative costs of leasing multiple vehicles over the years.
- Longevity and maintenance: A well-maintained car can last for many years, providing good value for your investment. Buying a car gives you the freedom to maintain it as you see fit, potentially extending its lifespan and reducing the need for frequent replacements.
Long-Term Financial Perspective
Suze Orman emphasizes the significance of a long-term financial outlook when choosing between leasing and buying. Here are some key factors to consider.
Overall Cost Analysis
Over time, the total costs of leasing several cars can exceed the expense of buying and maintaining one. While leasing may seem cheaper in the short term, it can lead to higher cumulative expenses.
Investment Opportunities
The money you save by opting to buy rather than lease can be invested in avenues that potentially offer higher returns. This strategic financial move can contribute to your overall wealth growth.
Final Take
While leasing a car might seem attractive for its immediate benefits, Orman’s advice is to consider the long-term financial implications. Buying a car, despite its upfront costs, often proves to be a more financially prudent decision in the long run. It’s crucial to assess your financial situation and future goals when making this important decision.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
