You’re probably looking for ways to avoid decisions that could be financial disasters. However, a terrible move for one person could be a fantastic decision for another.
If you ask Suze Orman, the financial expert, she’ll tell you that car leasing falls under a bad money move for drivers — but the reality is more complex than that. Here’s a look at some of her arguments and why they may not always be correct for all consumers.
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Orman’s take: It’s a waste of money
Orman clearly states she’s against leasing a car and thinks it wastes money. She calls it a way for the auto industry to get you to buy a car you really can’t afford. Orman said it’s also a financial problem because you’ll likely keep leasing cars instead of buying one. Ultimately, you leave with nothing to show for the money you spent to lease.
Our take: She’s probably right
We’ll dive into more specifics, but Orman is probably correct regarding leasing a car being an overall waste of money for most buyers.
While the monthly payments on a leased car might be slightly less than the one you’re buying, you’ll have nothing to show.
You’ll have paid for the lease each month, and then you need to buy or lease a new ride.
When you make monthly payments on a car to own, you’re putting your money toward an investment you could later sell to help finance a new vehicle.
Orman’s take: You don’t need a fancy car
If you’ve heard or read Orman’s advice before, she likes to focus on financial responsibility and long-term value.
That’s why she said a fancy car is a want, not a need. She doesn’t only take this approach for leasing a fancy or new car but also for buying a fancy vehicle beyond your reach.
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Our take: She’s not exactly right
For some people, having a nice or fancy car brings them happiness. It’s pretty tough to put a price on that.
While leasing or buying a higher-end vehicle can be expensive, there are ways to secure a nice car while still in good financial shape.
For instance, you could do a lot of research and find a good deal on a new car. Or, you may come upon a sensational leasing deal.
Orman’s take: You want to have something to show for your money
Orman is a big fan of using your finances in ways where you’ll have something to show for what you’ve spent.
If you lease a car, you pay the monthly amounts, then turn in the vehicle and start another lease.
That’s why Orman prefers buying a car. You make payments and have that car as property. You can also sell it later and have that money to use toward another vehicle.
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Our take: She’s right
For some people, the worst part of leasing a vehicle is that you have nothing to show when you’re done.
Of course, you could buy out the car after the lease and then own it. Orman makes sense when she calls vehicle leasing “a lousy deal.”
You pay monthly for using something you’ll most likely turn in after a few years. However, since you’re in charge of your finances, it’s really up to you and how you feel about leasing.
Orman’s take: Use your money elsewhere
One of the main reasons Orman said leasing cars is a giant financial no-no is that there are so many other places to use that money.
For instance, Orman looked at a scenario where someone takes the $350 they could spend each month on a lease, buys a car, and then pays it off.
That means the $350 could go toward an emergency fund, retirement contributions, or a more significant down payment on a house.
Our take: She’s right and wrong
Orman’s advice makes plenty of sense. You can save money by buying instead of leasing and use that monthly amount toward emergency savings or a long-term financial goal.
On the other hand, perhaps your financial situation looks different.
Maybe you’re already set with savings and long-term finances, so it makes sense for you to spend the monthly amount on a car lease.
As Orman has noted many times, it’s up to you to make the best use of your money, given your situation.
Orman’s take: There are bad motives for leasing
According to Orman, you and your family deserve financial security and much more than a fancy car.
She said some people lease cars because they want fancy rides to show off to neighbors, friends, and strangers. If that’s your motive, perhaps it’s time to look at how you spend your money and the reasons driving your financial decisions.
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Our take: She’s absolutely right
Orman makes a good point about not leasing a fancy car to impress others. However, you may have other reasons for wanting to lease a car, such as wanting the latest safety features.
If so, leasing a new car every few years can help you accomplish this goal. Similarly, you may like leasing to have the latest, most fuel-efficient vehicle.
Bottom line
Whether you agree with Orman about leasing cars being a giant financial no-no, there are good points on both sides of the argument.
It may be a financial mistake for some consumers, but it is a solid way for others to get ahead financially. It’s also an excellent decision to make with the entire family after examining your budget and future financial needs.
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