One of the things I like about running a personal finance blog is that it provides me with the opportunity to write out my thoughts while working through a real life problem. I have done this a few times over the years with quick examples being whether to purchase a rental property and whether to put solar on my home. Right now, I am trying to figure out whether 1) should I lease or buy my next car, and 2) if I buy what kind of car should I buy.
From the age of 17 to about 35 years old I had just two cars. My first car was a 1993 240sx that I got in 1999 at the age of 17. That car took a lot of beatings, but took me through college, through law school and then finally died in November of 2006. After that, I bought a barely used 9,000 mile Mitsubishi Gallant (side note reading my old post on the topic, I can’t believe I was paying 13% interest that was then reduced to 9% before landing on about 6%!). I drove that car from 2006 until August 2016. The car treated me well needing next to zero repairs, but it was getting up there in miles 
and I was feeling the lack of technological advances we all saw over those 10 years (rear camera, Bluetooth, etc).
It was at this point I leased my first car. I know that is a taboo subject when it comes to personal finance bloggers since it is basically renting a car for 3 years. The Wife always leased so I watched her getting a new car every 3 years and I wanted to partake in the process and fun. I traded in that still running, paid off Mitsu and leased myself a Lexus IS 300 for $400/mo (and the car as a down payment). Well that lease is up and now I sit wondering if I want to Lease vs Buy my next car.
Leasing versus Buying My Next Car
The two massive positives that I received were that I had almost no worries that something was going to go wrong that wouldn’t be covered in the first 36 months, and I got to drive a new car that I really enjoyed. Notwithstanding those two pros, as I come to the end of the lease I am going to say that I am actually bothered that I will have paid $14,400 ($400*36) plus the value of my still running car, and as of August 1st, 2019 I will own nothing. There is no corresponding asset on the balance sheet regardless of how much it may have depreciated.
If I stay on this hamster wheel, I will just be responsible for another ongoing bill that will beget another bill and that cycle is never ending. On the other side, if I stay on that hamster wheel of leasing then I can keep myself out of the mercy of mechanics who seem just to make shit up to fix!
While I believe that some people (including myself) need a nice-ish car, I don’t think it has to be a new one every 3 years to get that affect. Similarly, I don’t think I am the type of person that needs a new car every 3 years as evidenced by the fact that I have only “done” that once.
As I write this post and get my thoughts out there in the world, I am going to buy my next car.
The money I spent would have nearly paid off a very nice $20,000 off lease car that will still may have value.
What Type of Car I am Going to Buy Next
As is my nature I have been researching this topic ad nauseam and forcing The Wife and friends to listen to my random and ever changing thoughts on the topic. During my research I was shocked to find how much luxury autos depreciate once they are off lease, only to stabilize later in their life. If you are so inclined there is a ridiculous amount of data on UsedFirst.
For a factor of reasons (I want Android Auto, I want a body style that was just changed, tech is important to me but the suspension is not, etc.) I think I have narrowed it down to a few cars that I will continue to look at:
- Small Car – A4 (2017+ w/virtual console), Q50 (2017+ cheap to fix) and the ATS (love that hard look). These cars are on the less expensive side, and truth be told I enjoy driving smaller cars, however, my kids have said something when they compare it The Wife’s SUV. I don’t like the inside of the C-Class but love the way it looks from the outside, I have a feeling they are going to update the IS soon so I don’t want to buy it right now.
- Mid Sized – This is really where I was shocked with my research. You are talking about 50%+ depreciation just after 3 years! I like the E-Class 2017+ but that may not depreciate enough before the time I need to get a car, but that model and onward was just redone. I also like the CTS. The A6 follows that depreciation line but it was redone in 2019.
So, as you can tell I haven’t exactly narrowed it down in terms of model but it is an important decision since I am hoping to keep whatever I PURCHASE for the next 6 to 8 years!
instead of buying brand new, have you thought about getting a certified pre-owned vehicle that is 2-3 years old (often times, it’s a lease return)? If it is a fully-loaded vehicle, it will have the technology you need/want. As you say, there’s a lot of depreciation on certain brands of luxury cars (I remember seeing prices in the low $30s for a 2-3 year old Acura MDX with reasonable mileage (no more than 15,000 miles per year average)) If you still need to finance, most credit unions offer extremely competitive rates for used car financing (one near me does 3.25% up to 72 months so long as it’s no more than 3 years old). Just a suggestion to save some coin!