Is leasing a car really all that bad?

[corn18]

I will offer this additional metric outlined by disneysteve in another post here on SA:

"rule of thumb for buying a car is for the payments not to exceed 10% of your monthly income for no more than 3 years."

I think that combined with the DR RoT that the total value of everything with a motor should not exceed 50% of your annual income are probably good guidelines when determining if you can afford a car.

For the median family income of $51,900, that would indicate a monthly payment no larger than $432.50 for 36 months ($15,570 total loan payments) and cars totaling not more than $25,950 in value.

In the context of the median family income, I completely agree that a $32,000 car would be insane.

Tom

[koma1412]

i also would never leas a car...if you dont have money to buy one than don't

[greenskeeper]

That's just over $32,000 which isn't a lot for a new car. If it's @ 0% interest, you are making money. So how is that insane?

You never "make money" buy purchasing an asset that depreciates in value, even at 0% interest.

$450/month is insane to me for a car because you could take that money and put it towards something that increases in value instead of something that wears out.

[greenskeeper]

What constitutes "a lot" is all relative. Keep in mind that you earn tremendously more than most of us. So 32K might not be a lot to you, but it is to many of us. I've never spent nearly that much on a car, even a new one. My current car was bought used for exactly half that much.

For reference I make $60k/yr and have a family of 4. My wife does not work and stays at home with our boys (2 & 5 years old).

Even if the wife was working I would not purchase a car with anything but cash and the most I'd spend would be below $5k

[disneysteve]

In the context of the median family income, I completely agree that a $32,000 car would be insane.

Yep.

Even if you go to double the median income, so about $104,000, using Dave Ramsey's 50% rule, that gives a family 2 cars each worth about $26,000. That $32,000 "average" car is still out of reach. If there is a 3rd driver in the house that throws things off even more and makes that 32K car even less affordable.

[krantcents]

Leasing may make sense for someone who can write off the payment. If you buy the car, you can write off (for tax purposes) the car too. Most leases are attractive because of the low entry cost and much lower payment. In the long run, it is a more expensive choice vs. buying.