When Leasing a Car Works

Whether to accept the pride and hassle of ownership or opt for the expense and convenience of leasing a car seems a question old as the assembly line. These days, when kicking tires goes hand in hand with clicking buttons on a carmaker’s website, you need to run a lot of numbers before taking one road over the other.

My family is in the market for a new truckster to haul around kids, dogs, strollers and vacation luggage, so I revisit here the buy-versus-lease question. My friend Adam is one of the smartest guys on the planet when it comes to cars. Adam says leasing is likely the best option if:

1. Your credit is good. A credit score far south of 700 likely nixes you getting a lease, or at least a good deal on one. When you lease a car, the dealership technically just lends you their car. They want to make sure you take care of it and generally lease only to those with solid credit scores.

2. You rack up few miles a year. Fewer than 15,000 miles a year makes leasing sensible for you, but most commuters today drive more miles than they realize even before counting family trips and errands.

3. You like new cars. If you change cars every three to four years, leasing may work, as it’s much less expensive than buying a new car, driving it for three years and then trading it in and buying a new one. If you prefer one car for the long run, however, go buy.

To evaluate a car lease you calculate the monthly cost per $10,000, which should be less than $150. The best deals come in lower than $130 per $10,000. For example, I went to Honda’s website to look what the carmaker calls a “lease special” on a 2013 Accord Sedan CVT LX. The math shows how special the deal really is. The offer is for $219 a month for 36 months with, according to indications on the site, $2,399 due at signing. So you need to factor that figure into the cost.

The calculation: $2,399 divided by 36 months equals $66 a month, then add the $219 to $66 for a total of $285 a month. 

Click See Details on the auto dealer’s website and you find the manufacturer’s suggested retail price (MSRP) for the car, $23,270. Divide your monthly total of $285 by the MSPR, which gives you $122 per $10,000. As $122 is well under the $150 threshold, this lease offer makes sense. True, maintenance, repairs, gas and insurance all add to your monthly payment of $285, though costs of these variables are similar for bought or leased cars at least for the first three or so years. 

Leasing seems to carry a little bit of a stigma. You hear people say, “I only buy my cars,” or “I would never lease,” as if leasing never makes sense. This dotted line isn’t for everyone who wants a car. But those who meet the three criteria and take time to do the math may find leasing a much smarter option than it gets credit for.

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Wes Moss, CFP, is the chief investment strategist for Capital Investment Advisors and a partner at Wela Strategies, both in Atlanta. He hosts “Money Matters,” a live financial advice show on Atlanta’s 95.5 FM and AM 750 News/Talk WSB Radio. His two books are Make More, Worry Less and Starting From Scratch. He has appeared frequently on CNBC, Fox Business Network and on Atlanta-area television. He also writes weekly about personal finance in the “Bargain Hunter Section” for AJC.com, the site of The Atlanta Journal-Constitution. Connect with Wes on Twitter at @WesMossWSB and on Facebook at Wes Moss Money Matters

This article appeared originally, in different form, on AJC.com.

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