What is the best car option for Millennials? Should you lease a car or buy a car?
“You should never lease. Buying is always best.” Chances are that this is the standard advice your parents gave you when it came time for you to adopt a new car into your home. But is it really? Is buying always best for H.E.N.R.Y.s™?
Fact: Your car is not an investment.
When you buy a car, you are buying a depreciating asset (one that goes down in value, not up). From the minute you drive it off the lot, the car begins losing value. How much? Most experts say that the moment you drive your car off the lot, it’s worth about 11% less than the sticker price and after the first year, it’s lost about 20-25% of it original value.
Most of our Stash clients tend to prioritize upgrading their cars every few years. It makes sense. As our salaries increase, so does our taste. Leasing is a much more flexible option that allows you to obtain a car sooner and with greater flexibility.
There are a tons of benefits to leasing. One of the cool ones is that you can get a nicer car for less money than if you bought it - and sooner. If you’re not paying cash for your car (which we advise against in the first place), you’re typically required to put about 20% of the value down and can finance the rest. Instead of waiting until you build up the 20% down payment, you can lease a car for less money out of pocket. For example, buying a luxury car might be out of reach for a few years, but you might be able to afford the cost of leasing a luxury sooner.
You’re also typically always under warranty (aka you don’t have to pay to fix things) and when the lease is over you just turn the car back into the dealer. You don’t have to worry about trying to sell it on your own or haggle with the dealership to give you a better trade in value.
Another perk to leases is the ability to chose a lower-mileage lease, making it even more affordable. If you don’t drive much, choosing a 10,000- or 12,000-mile lease allows you to customize a lease to your driving patterns.
Lastly, it's easy to change up what you require in a car each time your lease is up. If your family grows and the convertible no longer cuts it, you can easily change it up when your lease expires.
Is there ever a situation where buying is better than leasing? Sure! If you fall into any of the categories below, then buying may be a better bet for you.
You're rough on your cars. Do you park in tiny garages where door dings are expected? Or do you aggressively parallel park and consider bumper scratches a badge of pride? Leasing probably isn't for you--you'll pay some penalty costs for every ding and scratch.
You put tons of miles on a car every year--like, more than 20,000 miles. If your commute stinks or you enjoy long, leisurely cross-country trips, then you'll likely be better buying where your mileage isn't restricted.
You’re trying to acquire a car that will one day be considered a collectible. (And no, your dream 2017 BMW is not a collectible. We're talking special edition cars that, in forty years, you'll enter in car shows and chat with other old-timers about the engine and paint job.)
You plan to buy and hold the car forever (well, more than seven years). If you're not that into having the newest model of car or aren't super into driving, then buying may work for you. Once you pay off your car, you're basically payment-free until your current whip falls apart.
Moral of the story? Don’t assume leasing is bad because your parents told you so. While our parents hold a treasure trove of valuable life advice, sometimes their truths don’t aren't pragmatic for our generation.
If you’re convinced that buying is for you, we love Beepi. The vehicles are second hand, but they are “dealer certified without the dealer markup”. So basically Beepi works in between the seller and you, cutting out the dealer (and their markup).
If leasing is more your jam, then you do have to negotiate directly with the dealership. We like using Edmunds to see what other people are getting the lease for and use that as a tool to negotiate.