Should You Lease or Buy a Car?

Today, we'll be discussing whether you should lease or buy a car. Hello, and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting here in Southeast Michigan. If you'd like more info about what you hear during our show today, give us a call 586-226-2100, or you can visit us online at our website, www.summitfc.net. While you're there, please check out that podcast page. You can see all the old shows. You can also subscribe on Apple Podcasts, Spotify, or Amazon Music. So when it's time for a new car, it is a major financial decision. Not everyone treats it like a major financial decision. Sometimes they just walk in and walk out with what looks pretty. But this could affect your budget every single month for the next seven years. So the big question is, should you lease or should you buy? Before we jump into this wonderful topic, let me introduce my two co-hosts for today. First, let me introduce Tony Shore, my longtime co-host. Tony, hold the phone. We got an extra host today. Very exciting stuff. Let me introduce our viewers and listeners to James Baldwin. He is...

Oh, wow. I mean, my goodness. The crowd goes wild for James. Look at that. What a huge get for the show, James Baldwin. How did you pull it off?

Apparently I wrote a really good blog that Ken liked and said, Hey, you know, we should come on here and talk about this.

Oh, awesome. So you did write a blog about this topic.

Yes. Yeah. One to two blogs a month for educational purposes through our website. And this was one, I actually got the idea from a buddy of mine. He, you know, sees my content, the things that I post on my Instagram page. And he said, Hey, you know, I was recently at a car dealership and I was wondering, should I buy or should I lease? And I was like, wow, that's a pretty good topic idea. Why didn't I think of that? And it's something we get as advisors asked all the time, ranging from ages 16 to 70. It's a question that comes up and it applies to really everybody.

Wow. So, Ken, James is an investment advisor representative there at Summit, right, with you? That's correct.

Yeah. Yeah. He's been with us for many years and, you know, we're happy to have him on our team. He's also basically an Instagram star at this point, Tony, for all of his educational videos. Yeah. That's awesome. Yeah, he is a great presenter on those and great content creator. So putting all that good knowledge to good use to help all of our followers.

Yeah, that's awesome. And I've got to start checking those out. I will be honest, I haven't seen your Instagram post, but now I'm going to follow you and check it out. Tony, you're on Instagram? I'm impressed. I have children. I have three children. Now, they all have now recently all been graduated from college. So they're a little older, but they are all on Instagram. So if I want to find out, especially my youngest, my daughter, if I want to know what's going on in her life, I pretty much have to be on Instagram. Yeah, that's a must, right?

Yeah, I am not really on Instagram, so I'm apparently the oldest person on the show today.

Oh, no, me, I'm not on there except once in a while. My wife will tell me, hey, you should check out Anna's Instagram page, my daughter Anna. But I'm not, you know, I'm on Facebook, but my kids are like Facebook. That's for oldies. I don't know. I can concur. Yeah, yeah, exactly. Oh, James. We just insulted 90% of our listeners, guys, real quick. Yeah, I'm all for Facebook. So I know that, Ken, you know, I know that you guys have this blog. And where can people check out the blog? It's summitfc.net slash blog.com. Okay. That's easy. So you guys do educational posts and James, you also post to Instagram. That's separate from that blog. There's a blog page and then you have Instagram posts, right?

Correct. Yeah. I have an Instagram account where we take these little shorts and reels. I also post the blog on there. But yeah, it's a great resource for little educational videos for people to check out.

All right. And today we're talking about should you lease or buy a car? And you wrote a blog on this, James. And I'll let you guys get into it pretty soon. But first, we've had a number of I think the question our listeners and viewers want to know is, James, the first thing we need to know from you that they all are going to be curious about, what's it like to work in the office with Ken? Yeah. I mean, is that, what's that experience like?

It's pretty, I'll say it's pretty good. He is on the other side of the office. I only see him every once in a while. Sure. Usually got his head into his work, get things done. But no, I can't, no complaints here.

Good, good. He doesn't hear all the complaining and gnashing of teeth going on at this end of the office. Yeah. You can't paint your mind either.

So we're good. Yeah. That's great. Well, how many Jims or James do you have working for Summit Financial Consulting?

Two. We had, gosh, what was it, a year ago, Ken, when we were interviewing new people to bring on. And one of the requirements we put in there was cannot be named James or Jim. Two is too many. Three would have been disaster.

Yeah. Yeah. I know there is a financial advisor in Omaha, Nebraska, who at one point there were four bills. Well, three bills and one Billy. Their main admin person and receptionist was Billy. That was her name. And then they had three bills, Bill Senior, Bill Junior and Bill Kaiser. Yeah. So, yeah. Yeah. So basically they had a policy where you had to, if your name wasn't bill, you had to change it in order to work.

I would change my name. I found myself in that.

Well, you might to move up there. I know you've been there five years and, and, and Ken sure respects you. He's told me good things, but to move up even further, you might want to change your last name, James to wink. Yeah. You think that would help? I think the family, you know, I'm just throwing these ideas out. That's me. I'm an idea man.

I'll certainly write that down. All right.

So what's going on with this topic? Where do we start?

So, yeah, that's like I said, that's a question we get all the time. And unfortunately, there isn't one clear cut answer or we wouldn't get asked it. Right.

It'd be a short show if you just if I asked you, should I lease or buy a car? And you just said, oh, definitely lease. Exactly. We wouldn't be here. It would be just chatting about changing names the rest of the show. Yes, exactly.

Yep. And so ultimately it tends to come down to four different things. One is gonna be your cashflow. Two is gonna be your lifestyle. The third is gonna be your driving habits. And fourth is gonna be your long-term financial goals. Those are definitely the main factors and things to think about when you are buying or leasing.

And everybody's situation is different. So the answer for one person might be different than the answer. If my neighbor says, oh, you got a lease, I always lease. Just because your neighbor does it or a buddy at work does it, doesn't mean you should, is what you're saying.

Exactly. And one thing people tend to gravitate towards is, well, what's the monthly payment? I just want to pay the least amount possible. And that's probably my best decision, but that's not always the case.

Well, sure, because, I mean, if you buy a car, those payments are at least going toward ownership. If you're leasing, it's just like renting. You don't have any ownership.

Exactly. Okay, yeah. Um, I think when you lease, you know, people are looking at the lease and they say, oh, the lease payment's lower, so that's got to be better. But, you know, Tony just summarized it perfectly. Like, you're basically just renting the car, right? And you're renting it during the most expensive years of the car's life, because everyone's heard that story: as soon as you drive a new car off the lot it starts to depreciate in value. And those first few years of when you own a car is when the depreciation hits really hard. So buying, you know, at least you've got something to show for it as time goes on.

Yeah. Yeah. So what's the monthly payment? That's the thing a lot of people ask. And if they can get a low monthly payment, that's all they care about. But you said cash, you know, cash flow or the low monthly payment is always only one piece of the puzzle, James.

Yeah, it's definitely a factor to consider. And obviously it's important. You got to make sure it's going to fit within your monthly budget. But like you just said, it's only one small piece of a few different factors that really go into it.

Yeah. Yeah. So when you James, when you leased your Bentley, why did you why did you decide to Ford Fusion when I think you had a Lambo and then a Bentley? But did you did you lease or buy those?

Funny enough, I did both for my Ford Fusion. I leased it. And then when the lease came due at the end of, what was it, 22, that's when the used car market was really, really popping. Prices were really high. So actually the price it cost me to buy the car was much less than what it was worth because everything had skyrocketed in price, even on used cars at that time. So I leased my car and then I actually took out an auto loan for the rest of it.

Oh, okay. I get it. Sure. Sure. Sometimes they have a buyback option at the end of the lease, right?

Correct. Yeah. That is one extra benefit with a lease is, you know, you kind of have that opportunity. Now, most cases, again, it depreciates. It's not going to be usually worth it to buy, but that was a really lucky scenario. But sometimes those opportunities come up from leasing.

Yeah. So what are some of the cons to leasing? The pros might be a low monthly payment or not having to worry about the maintenance later in the car's life because you'll turn it in. But what are some of the cons? Yeah.

Yeah, some of the cons, again, you're leasing it during the highest depreciation term. And then you have interest and fees and taxes, and you're essentially renting the car at the most expensive years of its life. Mm-hmm.

Yeah. And when you buy, you know, your payment's going to be higher because you're actually paying for the entire vehicle and you are paying interest and taxes and fees. But the big difference is at the end of the loan, you actually own something. So I think the most important question that everyone has to ask themselves is how long do you normally drive your cars for? If you get bored with your cars quickly, or if you are obsessed with having the latest technology inside your car, if you really find yourself in real life trading in a car every two to four years, then maybe buying doesn't make sense because you will pay more, but, uh, you know, in a lot of cases it makes sense to financially to tough it out. And then just, you know, for people that are willing to drive it until the wheels fall off, that's typically your best move financially. Cause eventually you're going to have years where you're not paying anything, you know, the car's paid off and now you just have to worry about auto insurance and maintenance and maintenance is a concern, but it's, it's usually quite a bit less than, you know, renewing the lease every, every two years or three years.

Yeah, my mom is actually a perfect example of that. When you ask those questions, how long do you keep your cars? She does not keep them very long. Do you get bored of your cars quickly? She does. Do you like having the latest tech? It's not the most important thing to her, but she certainly likes it. And you know what? Since I've been a kid, she's always leased her cars.

Interesting. Yeah. Yeah. I don't know that many people that lease, but I know they're out there. I used to know a lot more. But I've always been of the opinion that when it comes to cars, slightly used is the way to go. I've always purchased. I've always purchased, never leased. My wife leased a car once when we were first married. Other than that, I've I've personally always purchased cars and always slightly used low mileage used because I find that's the best deal, right?

A hundred percent. And you're avoiding that biggest depreciation timeframe that we talked about when you drive it off the lot in those first few years.

Yeah. Yeah. Yeah. I actually last year bought my first, I am 60. I just turned 60 years old last week and I bought my first new car this past September in my life ever. Oh, wow. Never owned a brand new car until September of last year. Every Range Rover. You know, I don't know why you threw that out there, but no, no. Actually, it's an all electric. It's a 2025 Equinox EV. Oh, I test drove that. I absolutely loved it.

When you put that thing in performance mode, it is so... Yeah, it is unbelievable.

Yeah, I did a lot of research and reading. And it was in September right before all the benefits to buying an electric vehicle expired. And it just one thing on top of another on top of another. I mean, the sticker was... 40 some thousand. I got it for $28,000 brand new. It had nine miles on it. That's awesome. And some of those were from my test drive. So. they weren't selling electric vehicles where I'm at don't sell, but because of my commute, it makes sense. And I'm going to, I did the math and how much it's going to cost. And it just makes sense for me. And it's a nice vehicle, very highly reviewed, you know, some of their other, you know, I talked to Chevy dealers that don't get the trailblazer, get the Equinox. So you got to do your research. And, and I looked into, I talked to some people about leasing and, But this was a better deal to buy. I've never had a new car before. I treated myself. So, yeah, yeah. I mean, working with Ken, you know, the big bucks just start flowing in the second I started working with Ken. So I'm like, I can treat myself to a new car. So, James, what's the key difference? I mean, between the key difference, though, between leasing and owning, right? Yeah.

Yeah, I mean, one of the general rules of thumb we always tell people is with leasing, you're usually looking at a short timeframe and buying, you're looking at a long-term timeframe. Buying, you're gonna get equity. You're gonna hopefully ride out this car for quite a while. Versus leasing, you know, you're going to have it for two to three years, but you're going to have something new. And when it comes due, hopefully get something new again to kind of feed your interest of having that fancy new object.

And the bottom line is at the end of the loan, when you buy a car, you're going to own something. Exactly.

A lot of people will do when they do finally own it. You can even then get a new car too. You could sell it and use that money towards your down payment on a new car or even a lease. So you do have some flexibility there when you do buy.

Yeah. And some drivers like to drive cars until the wheels fall off. And my family has been doing that for a while. You know, we had a Toyota Sienna minivan when the kids were little, you know, hauling the kids around to sports. We put $280,000, I think, on that van. Wow. I mean, it went, it went, of course, when it, when it went, it went for a while, it went well for a while. And then when it went bye-bye, it went by. I mean, it was just like, we were somewhere on the South side of the city and it just, that was it. It was done. The wheels actually fell off. The wheels didn't fall off, but the engine basically fell out. The engine said no more, please. Probably worse. Yeah. Yeah. Yeah, definitely. So we used to be that way. And I'll tell you what, those years with no car payments are awesome. But then toward the end, you start putting more and more and more money in as far as repairs. And that doesn't feel good.

Yeah, that's certainly the thing I'm almost considering myself too. I've got a year and a half left on my auto loan for my car. And I know that payment will be nice. But by the time that year and a half auto loan ends, my car is going to be at probably 105, 110,000 miles. And that's when I feel like things tend to go wrong. I won't have a payment, but in the back of my head, I know expensive repairs and things are probably going to come up at some point.

Right. Right. Yeah. Yep. And then mileage is a big one, right?

Yeah, mileage is huge. When you're leasing, you might have a 10,000 mile limit, 12,000, 15,000 mile limit, but really a lot of that depends on your circumstance. If you're somebody who commutes really far every day, I know people who drive over an hour to work every day, a lease is never gonna work for them. Some people go on vacations in Michigan here. Up north is a super popular place for people to go. So there's tons and tons of miles there. My dad's somebody who hunts during hunting season. He's driving up north and back every weekend or every other weekend. And so for him, a lease doesn't really make sense. And then another one is for families, somebody who has children who play sports, who have to drive them to their baseball tournament every other weekend as well. So those are some factors to definitely consider when you're looking into a lease. And, you know, you're worried about hitting that mileage limit because that can be a big deal, because if you do go over it, you're looking at very expensive fees for extra miles.

Yeah. I've got a good story guys. So I leased 10 or 15 years ago, I was leasing and, and, and, you know, with all my financial calculating prowess, I figured, I think I'm going to use exactly 10,000 miles per year. So exactly one year after I bought my car and, like on January 2nd, like as soon as the dealership reopened and they had some deals on the previous year models. So there's a picture of me that I posted on Facebook one year later where I was like, I was pretty close in my calculations and I was 9,999 miles parked in my driveway on New Year's Eve.

Oh my God.

I figured it out exactly. Fast forward a couple of years later, I was doing the same kind of thing and I had a pickup truck and I was doing the same kind of estimations, but something changed. We got a camper and I started towing it and I didn't factor in those trips up North and trips to the UP. And I ended up going way over my miles because I just, you know, something changed. We, we got a camper. So those kinds of things can happen and it's good to plan some cushion. You don't want to get it right down to the exact mile that you're going to be driving the way that I did. You know, it, what if you get a new job and it's farther away from work? Or what if your kids don't play travel sports right now, but then all of a sudden they start playing travel sports and now you're driving all over town on weekends. So good to have some, some flexibility there and some breathing room when you're trying to figure out how many miles you need, because odds are you're going to need them.

Yeah. And I think a lot of people lease and then they, I'll go over whatever. But that gets really costly and you're paying a lot of extra money then, right? If you do go over your miles.

Yeah, those penalties, the penalties for driving over miles are terrible and they add up really, really fast. And I've seen clients in the past where they say, you know what, I've got a penalty. I'm turning in my lease. Well, let's just roll that penalty into the payment for the next vehicle. And then two years later, they go over miles again. And now they're rolling over the penalty to the next lease. And before you know it, they got this ridiculously huge lease payment because they're just trying to make up for all what I would call the sins of the past of going over mileage.

And that's how they get you. That's how they really I mean, it's almost like credit card companies or like, you know, no interest, no payments for, you know, no interest for two years or a year. But then when that time comes, if it's not all paid off, you have to pay interest on all of it. And it's super high. And so they kind of let you keep building up the costs and adding it in to what you owe. Right. Yeah. Yeah. That credit card, it's very credit card-esque, as you mentioned, for sure. Yeah.

It has Mr. Potter vibes. James, during our Christmas episode, Tony accused me of being Mr. Potter from It's a Wonderful Life.

You know, the only thing I remember from the Christmas episode was Tony's suit coat.

Oh, did you? Was it distracting?

I actually had to switch to the audio version.

You've had an actual eye twitch ever since, actually, since seeing that jacket. Yeah. Yeah. We have to put a warning in front, you know, for people who, if you experience seizures, you might not want to stare at the jacket too long.

Certainly not.

Wow, what a callback to the Christmas episode and that crazy jacket. Hey, I will say an investment advisor representative purchased that jacket for me to host their client event.

I knew, I heard it was a gift.

Yeah, it was a gift. It was a gift, but I just knew Ken would appreciate it. That's all. That's all. So what about if our listeners out there do have questions about leasing or buying and what's right for them? I know you guys are happy to look at their situation. You know, you can run reports or answer questions about their financial investments, their retirement planning. But if people have questions on leasing or buying, what can they do?

Yeah, give us a call at 586-226-2100 and just ask for any of our extremely talented financial advisors in the office, but you can certainly ask for me or James and we'd be happy to go through. Should you lease? Should you buy? Does the equity matter? How many miles do you drive? If you make a decision about leasing or buying, how is this gonna impact your 401 contributions or saving towards retirement? What year can you retire? So many things that, are you gonna save for your kid's college? Are you gonna save for your kid's budding sports or dance career? So many things that you can consider when making these financial decisions. So it's really one of the big, other than your house, this might be one of the biggest financial decisions you make. So definitely worth reaching out. Give us a call at 586-226-2100. We'd love to talk it over with you.

All right. And what's that blog address that people can read the Summit blog?

It's summitfc.net slash blog. And you can also go to YouTube. Tony, you're a big part of this. We're over 5,100 subscribers just on YouTube alone now.

Nice.

In our first year, we were hoping to just get 1,000 subscribers. We're up to 5,100. Right.

I think it's the jacket I wore in that one episode. Yeah.

There was a negative 30 subscribers.

You lost some subscribers from that episode due to eye strain.

Yeah. It's been upward and onward much, much faster growth than we would ever imagine. So yeah, if you search somewhat financial consulting on YouTube, then you can wear the first option that comes up there as well. Tons of educational videos, our past shows, um, Just lots of golden nuggets of knowledge that we're sharing here, Tony. Excellent.

Yeah. And we also have our Summit Financial Instagram where you can find those short videos. And then I have my own Instagram, James underscore Summit FC, where I post weekly little tips and tricks and educational short one minute videos. All right. What's your personal Instagram, James?

James underscore Summit FC. Easy. James underscore Summit FC. I'm going to go as soon as we're done with the show. I'm going to go there. I'm going to check it out. I'll be waiting to see the follow. Oh, yeah. Oh, yeah. I'll follow you. Can you leave comments on Instagram? Unfortunately, we cannot. Okay. Yeah. No, that's right. Especially if it's with Summit, you can't. Yeah, that's true. Shoot.

Because I would have some comments for you, James. Yeah, you can find my worst jacket or outfit that I wore and get me back.

I'm sure there's no comparison. That jacket was something else. All right. Well, thanks, guys. Great show today. And listeners. Viewers, pick up the phone. Give these guys a call at Summit. If you have any questions about finances, you want a consultation, get a financial plan or a retirement plan in place. You need to be working with a trusted financial services professional. That number again is 586-226-2100. That's 586-226-2100. And that does it for today's episode of Summit Financial Consulting LLC Money Talks with our host, Ken Wink, and today, James Baldwin. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit summitfc.net. Join us again soon for another episode of Money Talks.