Saving Money: Which is Better - Buying or Leasing a Car?

Summary

The transcript discusses the pros and cons of buying versus leasing a car. It highlights the appeal of ownership, such as having no ongoing payments after purchase and the ability to sell the car for its remaining equity. However, it also points out the downsides, including depreciation and repair costs. Leasing offers benefits like lower monthly payments, new cars every few years, and typically no repair costs during the lease term. The choice between buying and leasing depends on personal preferences, such as valuing long-term ownership or enjoying the novelty of a new car regularly.

Takeaways

• 🏎️ Buying a car means you own it outright and can enjoy the feeling of ownership once it's paid off.
• 📉 A downside of buying is the immediate depreciation of the car's value when you drive it off the lot.
• 🛠 Owning a car also means you're responsible for all repair costs after the warranty expires.
• 💰 There's an equity benefit to owning, as you can recoup some of the car's value when you sell it.
• 🚗 Leasing a car often comes with lower monthly payments and sometimes no money down, making the upfront costs lower.
• 🔧 Leased cars are usually under warranty for the entire lease, reducing repair costs.
• 🚫 With leasing, you don't own the car and are subject to mileage limits, which can incur additional costs if exceeded.
• 🆕 Leasing allows for driving a new car every few years, which appeals to those who enjoy having the latest model.
• 📈 The cost of insurance may be higher when leasing due to the need for gap insurance, which covers the difference between the car's value and the remaining lease payments in case of a total loss.
• 🤔 The decision between buying and leasing depends on personal preference, with some preferring the security of ownership and others valuing the benefits of leasing.
• 🏆 There's no universally 'better' option; it's about what suits an individual's lifestyle and financial goals.

Q & A

What is the main concern of the person considering a new car?

The main concern is whether to buy or lease a car, as they are unfamiliar with leasing and want to make an informed decision.

What is appealing about buying a car according to the script?

Owning the car outright is appealing because it provides a sense of ownership and financial freedom once the car is paid off.

What are some downsides of buying a car mentioned in the script?

Downsides include immediate depreciation of the car's value once driven off the lot, the hassle of selling a car, and the responsibility for repair costs.

What is the advantage of leasing a car in terms of warranty?

Leasing a car is attractive because the car is generally under warranty for the entire lease period, reducing repair costs.

Why might someone prefer leasing over buying?

People might prefer leasing for the opportunity to drive a new car every few years, lower monthly payments, and often no money down.

Outlines

00:00

🚗 Car Ownership vs. Leasing: Pros and Cons

This paragraph discusses the dilemma between buying and leasing a car. It highlights the appeal of owning a car, such as the satisfaction of outright ownership and the potential for the car to 'make money' after it's paid off. However, it also points out the downsides, including depreciation, the hassle of selling a car, and the responsibility for repair costs. The paragraph also touches on the benefits of leasing, like having a car under warranty, lower monthly payments, and the opportunity to drive a new car every few years, but notes the lack of ownership and potential additional costs like exceeding mileage limits and higher insurance premiums.

05:02

🔑 Personal Preferences in Car Ownership Decisions

The second paragraph delves into the personal preferences that influence the choice between buying and leasing a car. It suggests that individuals often stick with one option for a long time, similar to the preference between coffee and tea. Some people prefer the security and long-term cost reduction of owning a car, while others enjoy the novelty and convenience of leasing, including the benefits of a warranty and lower upfront costs. The paragraph concludes that there is no universally correct choice, and it's about what suits an individual's lifestyle and preferences best.

Keywords

💡Car Ownership

Car ownership refers to the legal right to possess and use a vehicle. In the script, it is highlighted as a significant advantage of buying a car, as it provides a sense of control and the ability to do what one wants with the vehicle. The theme of the video revolves around the decision between buying and leasing, and car ownership is a central concept that differentiates the two options.

💡Depreciation

Depreciation is the decrease in the value of an asset over time. In the context of the script, it is mentioned as a downside of buying a car because the vehicle immediately starts losing value once it is driven off the lot. This concept is crucial in understanding the financial implications of car ownership.

💡Financing

Financing is the process of obtaining funds to purchase an asset, often through a loan. The script mentions that most people finance a car, which means they pay for it over time rather than with a lump sum. This concept is important in the discussion of car buying as it affects the total cost and the time frame of ownership.

💡Leasing

Leasing is a contractual agreement that allows a person to use a vehicle for a specified period by making periodic payments, without transferring ownership. The script discusses leasing as an alternative to buying, emphasizing benefits like lower monthly payments and the opportunity to drive a new car every few years.

💡Equity

Equity in a car refers to the difference between the market value of the car and the remaining amount owed on the loan. The script mentions equity as a benefit of buying a car, as the owner can sell the car and recover some or all of the initial investment, depending on the car's value at the time of sale.

💡Repair Costs

Repair costs are the expenses incurred to fix or maintain a vehicle. The script points out that with car ownership comes the responsibility for repair costs, which can be a significant financial consideration, especially as the car ages and the warranty expires.

💡Gap Insurance

Gap insurance is an additional insurance coverage that covers the difference between the actual cash value of a leased vehicle and the remaining balance still owed on the lease if the car is totaled or stolen. The script mentions gap insurance as an important consideration for those who lease cars, as it can protect against financial loss in the event of a serious accident.

💡Mileage Limit

A mileage limit is a specified number of miles a leased car can be driven within a lease term. The script discusses the concept of a mileage limit in the context of leasing, noting that exceeding this limit can result in additional costs per mile, which is a factor to consider for those who drive frequently.

💡Trade-In

Trade-in is the process of exchanging a used vehicle for a new one, often as part of the purchase price. The script mentions trading in a car as a way to reduce the hassle of selling a car privately and to offset the cost of a new vehicle, which is a common practice in car dealerships.

💡Warranty

A warranty is a guarantee provided by the manufacturer or seller that covers the repair or replacement of a product under certain conditions. In the script, the warranty is mentioned as a benefit of leasing, as it typically covers the vehicle for the entire lease period, reducing the lessee's responsibility for repair costs.

💡Personal Preference

Personal preference refers to an individual's inclination or choice based on their own tastes and priorities. The script concludes by emphasizing that the decision between buying and leasing a car depends on personal preference, suggesting that there is no universally 'right' or 'wrong' choice, but rather what best suits an individual's lifestyle and values.

Highlights

The appeal of owning a car outright, including the satisfaction of eventual ownership and potential for the car to 'make money' after it's paid off.

The downside of car depreciation immediately after purchase and the responsibility of owning the decreased value over time.

The hassle of selling a car person-to-person and the alternative of trading it in at a dealership for a less stressful experience.

The responsibility of repair costs when owning a car, as opposed to the potential for free repairs during a lease.

The advantage of owning a car for the equity it provides, which can be used for various purposes after selling.

The benefits of leasing a car, such as having a car under warranty for the duration of the lease and avoiding repair costs.

The opportunity to trade in a leased car every few years for a new one, satisfying those who prefer driving new cars regularly.

Lower monthly payments and typically lower upfront costs associated with leasing compared to purchasing a car.

The lack of ownership in leasing, which means not having the car's equity and the freedom to do as one wishes with it.

The potential additional costs of leasing, such as mileage limits and the associated fees for exceeding them.

The necessity of gap insurance when leasing, which covers the difference between the car's value and the remaining lease payments in case of a total loss.

The impact of leasing on insurance rates, as gap insurance can increase the cost.

The comparison of ownership and leasing costs, including upfront, repair, and insurance costs.

The non-monetary benefits of leasing, such as having a new car every few years, which can be priceless to some.

The personal preference aspect of deciding between buying and leasing, as different individuals have different priorities and lifestyles.

The conclusion that there is no right or wrong answer in choosing between buying and leasing, as it depends on personal preference.

The idea that everyone can be a winner in the decision-making process, as long as it aligns with their personal preferences and needs.

Transcripts

so Josh I need a new car I'm sick of the

one I got and I don't know whether I

should buy a car or lease a car

I've never leased a car I've always been

a purchaser but I don't really know

which one's best because here I am an

adult I need to make an informed

decision that's good so I know buying a

car because I bought cars before is

pretty cool because you own it outright

and I like owning something you know and

you know once you pay it off of the bank

it's yours it starts making you money I

feel like after it's paid off right so

is that the way to go why are you asking

me well cuz you know about this stuff

I'm kidding I know all about this stuff

are you ready yeah I can tell you Chuck

as a purchaser yeah

there is a huge draw to owning the thing

that you bought yeah like I like that

feeling right so most people have to

finance a car yeah it's not like you

walk in with like the cash in your

pocket in most cases some people do you

know people wear top hats and monocles

and stuff yeah but for most of us were

financing but once you finish paying

those making those payments you own the

car huge draw to buying for some people

yeah well there's some downsides though

like once you drive that thing off the

lot it immediately starts depreciating

in value right I mean that's a hard fact

of car ownership when you buy it you

also own the decreased value over time

yeah selling a car from person to person

ain't a lot of fun right um and that's

on you be if you're like a really

friendly kind of person who likes to

meet people through the internet you can

do it by selling a car yeah it's kind of

a hassle though a lot of people find

it's a hassle and you can make it less

hassle e if you take it into a

dealership and say you know I want to

trade this in for another car yeah but

if you really want to get every penny

you possibly can out of a sale you're

gonna want to do it yourself and yes it

is a hassle

yeah plus repair costs yeah so that's

that that's definitely something when

you own the car it's not like you can

take it somewhere and be like fix this

for me for free right they'll tell you

there's no such thing as a free lunch

yeah you might have a warranty for a

little while but if you own the car long

enough that's

run out and then it's all on you to keep

up the car you know with your pocketbook

right but again you own the car it's

yours to do what you want with and the

other really big draw to owning a car is

the equity you have in it sure when you

go to sell it whatever value is left in

that car

you get back yep right so that's yours

to keep and you can use it to go to the

track with or buy another car maybe get

something nice for your spouse sure

there's all sorts of things you can do

so there's equity yep there's ownership

and yes there are downsides to owning a

car yeah that's the buying part yeah

what about leasing now while leasing can

be attractive to certain people because

wait a minute thought you didn't know

any of this stuff well I've been only

sir's in my life okay I've gone to lunch

with a few of them that's it and they

always brag about the fact that you know

their car is generally under warranty

for the entire lease yeah so they don't

have to pay for repair costs right they

can trade it in every few years but

that's a huge one get a new car a lot of

people are really into that that's a

probably one of the biggest reasons

people lease cars is because every few

years your car starts to get a little

old ish and then BAM you have a brand

new and brand spanking new one yeah um

monthly payments on leases are usually

way less during a monthly payment on a

purchase car yeah and there's often no

money down very little or no money down

so the upfront costs are typically lower

in leasing a car sure him buying a car

yeah again though everything has a

downside

well you don't own the car right you're

basically renting it long-term yeah

sometimes your additional costs involved

like of a mileage limit if you go over

that mileage limit you're going to have

to pay per mile right so if you drive a

lot you're gonna want to maybe negotiate

a higher mileage limit or think maybe I

should just buy the car yeah

insurance is usually a lot more it's not

more just out of the gate but if you are

leasing a car you want to add something

called gap insurance gap insurance

covers you if you total your car and it

will cover the difference the gap

between what your car is worth and value

that by the insurance company and what

you still

on the lease which can be significant

sure you never want to get a car that

you're leasing without adding gap

insurance so that's going to raise your

insurance rate a little bit so where are

we we're talking about the costs of

ownership like just owning a car or

leasing a car has cost there's upfront

cost there's no upfront cost there's

repair costs there's no repair cost

insurance costs yeah there's there's

costs and benefits that you can't even

put a dollar sign on like having a new

car every few years yeah which one's

better well I think it kind of boils

down to what kind of person you are like

I've found that leasers and buyers

generally stick with that for a long

time like sort of like being a coffee

person or a tea person sure some people

really like the security of owning a car

driving it till the wheels fall off of

it and really seeing that cost amortized

go down over the years other people

really like having that shiny new car

every few years they don't mind paying

the lease they like having their repairs

taken care of so I guess it depends on

what kind of person you are okay so

there's no right or wrong answer ah

that's what I'm going with and then that

means everybody wins hey that's not bad

everybody wins