Is Buying a Car an Investment? Or Should You Lease?

“You should never lease. Buying is always best.”  Chances are that this is the standard advice your parents gave you when it came time for you to adopt a new car into your home. But is it really? Is buying a car always best for H.E.N.R.Y.s™?


Fact: Your car is not an investment.

When you buy a car, you are buying a depreciating asset (one that goes down in value, not up). From the minute you drive it off the lot, the car begins losing value. How much? Most experts say that the moment you drive your car off the lot, it’s worth about 11% less than the sticker price and after the first year, it’s lost about 20-25% of its original value.

Most of our Stash clients tend to prioritize upgrading their cars every few years. It makes sense. As our salaries increase, so does our taste. Leasing is a much more flexible option that allows you to obtain a car sooner and with greater flexibility.

There are tons of benefits to leasing. One of the cool ones is that you can get a nicer car for less money than if you bought it – and sooner. If you’re not paying cash for your car (which we advise against in the first place), you’re typically required to put about 20% of the value down and can finance the rest. Instead of waiting until you build up the 20% down payment, you can lease a car for less money out of pocket. For example, buying a luxury car might be out of reach for a few years, but you might be able to afford the cost of leasing a luxury sooner.

You’re also typically always under warranty (aka you don’t have to pay to fix things) and when the lease is over you just turn the car back into the dealer. You don’t have to worry about trying to sell it on your own or haggle with the dealership to give you a better trade in value.

Another perk to leases is the ability to chose a lower-mileage lease, making it even more affordable. If you don’t drive much, choosing a 10,000- or 12,000-mile lease allows you to customize a lease to your driving patterns.

Lastly, it's easy to change up what you require in a car each time your lease is up. If your family grows and the convertible no longer cuts it, you can easily change it up when your lease expires.


buying a car investment leasing


Is there ever a situation where buying a car is better than leasing?

Sure! If you fall into any of the categories below, then buying a car may be a better bet for you.

1. You're rough on your cars. Do you park in tiny garages where door dings are expected? Or do you aggressively parallel park and consider bumper scratches a badge of pride? Leasing probably isn't for you–you'll pay some penalty costs for every ding and scratch.

2. You put tons of miles on a car every year–like more than 20,000 miles. If your commute stinks or you enjoy long, leisurely cross-country trips, then you'll likely be better buying where your mileage isn't restricted.

3. You’re trying to acquire a car that will one day be considered a collectible. (And no, your dream 2017 BMW is not a collectible. We're talking special edition cars that, in forty years, you'll enter in car shows and chat with other old-timers about the engine and paint job.)

4. You plan to buy and hold the car forever (well, more than seven years).  If you're not that into having the newest model of car or aren't super into driving, then buying may work for you. Once you pay off your car, you're basically payment-free until your current whip falls apart.


buying a car investment leasing


Moral of the story? Don’t assume leasing is bad because your parents told you so.

While our parents hold a treasure trove of valuable life advice, sometimes their truths aren't pragmatic for our generation.

If you’re convinced that buying a car is for you, we love the newly emerging business models like Fair and Shift that are changing the way we buy cars by eliminating the traditional dealership. If leasing is more your jam, then you will have to negotiate directly with the dealership but can use Edmunds first to see what other people are getting the lease for. Use Edmunds as a tool to negotiate.


Related: Why Are Millennials Renting Not Buying Homes?

millennials renting not buying

Share This Article
Author Headshot

Priya Malani is an entrepreneur and founding partner at Stash Wealth, a financial planning firm for H.E.N.R.Y.s™ [High Earners, Not Rich Yet]. After years of working on Wall Street, Priya left to work with Millennials, who are largely ignored by traditional financial firms. Stash’s clients are 20 + 30-somethings who make good money and want something to show for it. In addition to running Stash, Priya serves as the Resident Financial Expert for Refinery29. She is a featured expert on numerous sites including Gawker, The Coveteur, Shape Magazine, Bustle, PureWow, Brit + Co and Forbes. She speaks regularly at business and universities around the country and has been invited to speak at Cornell, Harvard, New York University, Yelp, Twitter, Blue Apron, IBM and more. She appears regularly as the Millennial Money Expert on SiriusXM Radio’s Wake Up With Taylor broadcast.

Know More. Spend Less. Live Better.

Sign up for our FREE e-course + learn the 7 MONEY MYTHS that are messing up your finances!