12 Financial Rules Made to be Broken, Rule 4

Here's part four of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 4: Buying a car is always cheaper than leasing.

Verdict: Thumbs down. It depends on your driving habits, the type of car you’re considering and what else you could do with the money.

One big benefit of leasing, says Michael Kranitz, chief executive officer of LeaseWizard.com, is that you can keep more money in your pocket. You don’t need a down payment and monthly payments are lower -- nearly half as much on some luxury models if you lease rather than buy. Invest the difference, and you could come out ahead.

Leasing is also the better deal if your car’s value declines more than predicted, says Kranitz. This can happen if the manufacturer offers rebates on its new cars or introduces a new model, making the used car less attractive. "You’d probably come out better at 36 or 48 months because the leasing company absorbs the depreciation," says Kranitz.

In general, if you buy a new vehicle as soon as your old one is paid off, leasing can save you money. Buying is a better deal if you hang on to your old car.

I think they are stretching here and playing on words. The "rule" they discuss is quoted as "buying a car is "always" cheaper than leasing." In personal finances, there are really rather few "always" rules. So from that standpoint, they are technically correct (it isn't "always" the best option to buy). However, in the vast majority of the cases, buying is going to be better.

I admit that they do have a point on people who want to have a new car every couple of years, but if you're reading this blog, you should be waaaaay past that issue.

Click here to read Rule 5.

Comments

[Michael Blackburn]

They are also comparing buying a new car to leasing. IMHO, buying a used car is way better than both. Always.