New vs Used vs Lease Car? Which is right for you?

For 18 years I walked everywhere or took the bus. I hated every moment of it. I even walked to the hospital when I was almost bleeding to death because the ambulance was taking too long (long story). So when I got old enough, I wanted the car I wanted and I didn’t want to walk anymore. However I had no clue how to buy a car or what my options were. As a result I made some huge mistakes.

Mistake #1: Not knowing my options

Before buying a car, you need to know what your options and limits are. In order to answer that question, you have to know yourself.

For instance if you know you drive less than 1000 miles a month, hate paying for maintenance, and you’ve had more than 3 cars in the last 5 years, but you’re buying a new or used car every time…

You are shooting yourself in the foot. You should be leasing a car.

While on the other hand, if you know you hate car payments, don’t mind having an older car, and don’t need the bells and whistles, then a used or new car may be for you. But the reality is you need to know who you are and you have to be honest with yourself.

That leads us to…

Mistake #2- Exceeding budget limitations

Look we all would love to drive a Tesla, but the reality is we all don’t have Tesla money.

My goal is to obtain financial independence and build generational wealth for the benefit of those who come after me. I’ve known for a while that’s what I want to do and still I have made the mistake in the past of overpaying for a car because I was so enamored by owning it.

After a month of owning a new car, those emotions go away and reality sets. Plain and simple, In the end it’s just a car that’s responsible for getting you from point A to point B. That’s the bottom line.

Please understand, what you are paying for is comfort. The question you have to answer is how much is that comfort worth to YOU? For me comfort is worth a lot because I spend a lot of time in my car. However that short term comfort is not worth eating into your savings/investments and delaying your financial goals.

Before deciding upon a purchase or a lease, know how much you can afford then set the maximum amount you’re willing to pay at 80-90% of that number. Keep that buffer there so you don’t allow emotions to take over when buying or leasing a car.

Trust me you’ll thank me later.

Mistake #3: Not shopping around

Buying or leasing a car should be viewed in the same manner as looking for a house/apartment to buy or rent. You wouldn’t pick the first house without seeing what else is out there, so why would you do the same with a car? If you add up the amount of hours spent in a car, you’ll see that you spend a significant portion of your adult life in a car. That time is important. So the car you choose is important as well.

Car salesmen have no responsibility to take care of you’re interest despite what they are telling you. Their entire job is to move those vehicles off the lot because every day they vehicle is on the lot, it costs their dealership money. Dealerships make more money off of the car loans than the actual car. Because of that they don’t care about the car and are willing to sell you anything in exchange for a higher interest rate on your loan.

So shop around and make sure you’re not getting screwed by someone tried to sell you some nonsense at an astronomical rate.

Again I’ve made this mistake 2x in my life. Won’t ever happen again though.

Now what type of car do you buy?

Well that’s hard to say because this choice is a personal one. It should be based upon you and what you value.

I know I love cars and I know I love technology. The result of that leads me to wanting a newer car every couple of years as new technology comes out and as a result I lease cars. I’m fine with that. It also fits my budget. But that doesn’t mean it’s the right choice for you.

A car is a liability or at best a depreciating asset. But it’s never an investment. Purchasing a lease, new, or used can be a great choice in the right situation. It’s all based upon you. Remember we are trying to attain financial independence. Don’t set your plan back by purchasing a car that isn’t for you.

As always if you have questions or concerns regarding creating an emergency fund, investing, real estate, insurance, or planning for the future, don’t be afraid to speak with qualified financial advisor. Smart Asset has a great tool to find an advisor in your area or feel free to email me (contact@surgifi.com) to help you on your path to financial independence.