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James Brennan, CFP

Have you considered leasing?

Are you or your parents in retirement and ready to purchase a more reliable car? Here is an idea I want you to consider: Rather than purchasing your next car, consider leasing it instead!

Per AAA, AARP and others, the average retiree (65+) drives 6,000 miles per year, most of which is to the store and back (i.e., local trips). I have seen too many clients purchase new cars with all of the bells and whistles they have always wanted, only to drive it 3,000 miles per year. The car has all of the stops and starts and daily wear and tear, yet in 5 years, it has less than 15,000 miles registered.

Based on these experiences, my recommendation for retired couples is to have one owned car, purchased new or used, and one leased car. The owned car can be used for long, exploring trips, carting grandkids, and hauling stuff; the leased car can be used for local trips and dress up occasions, and function as that car with the bells and whistles that is safe and reliable. This is the car that I would recommend leasing! If you are a single retiree, the choice between buying a car vs. leasing a car depends on how far you plan to drive your car. Let’s explore this idea further.

For example, you can lease a $35,000 BMW 3 Series (hey, you’re worth it!) for $320 per month or finance the same vehicle over 3 years at 1.9% for $758 per month. While you’d own the vehicle in 3 years, you would have paid $36,374. If you had leased the same vehicle for 3 years, you would have paid just $15,360, a savings of $21,014.   Granted the financed car is paid for and no longer has a payment but the main advantage here is that the person who leased the car is now able to lease a new car with no wear and tear, new safety features, and full warrantees…not to mention an extra $21,000 to spend on the next leased car. If this was my mother driving the car, I would want her in the leased vehicle, and that is the main focus of this article. Truthfully, my hope is that they will have a driverless car in 3 years so that I know she will get to and from the store safely.


Here are some points to consider before you lease:


  • Low Down Payments: Even though a lot of the advertised lease deals assume a down payment, you can often get the dealer to limit it simply by asking. Of course, the more cash you initially come up with, the lower your monthly payments. Also note that the taxes, fees, and other costs are much lower for the leased
  • Low Monthly Payments: As I demonstrated above, since you are only paying off the depreciation on the car — not its full value — your monthly payments are much lower than if you opt to finance the purchase of the entire car over the same period of
  • Easy Turnover:: Assuming your car is in good shape, when your 2, 3, or 4 years are up, just stroll into the dealer, hand over the keys, and drive out with a brand new car and a new lease arrangement. You don’t have to bother with selling the car or haggling with a dealer over trade-in value. That was all taken care of


  • No Equity: Similar to paying rent on an apartment, your lease payments don’t go towards owning Unlike traditional fi- nancing, you can’t look forward to the day when the payments will stop and you can drive your own car free and clear.
  • Lack of Flexibility: You pay a big penalty if you want out of the lease before the full Bailing out early may cost you as much as six extra months of payments, depending on your leasing company.
  • You May Pay Extra: Most leases charge an extra 12 or 15 cents for each mile you drive over a certain limit. Typically the lease agreement grants 12,000 to 15,000 miles per year. Drivers under age 55 average 15,000 miles per year. Also, you’ll have to pay up for any damage to the car beyond normal wear and tear when you turn it
  • Insurance May Come Up Short: If you total the car or it gets stolen, your insurance will only reimburse you for the car’s market value, which might not cover what you still owe on your lease. You can buy extra gap coverage to protect against this, and some lease deals include it


This article is about safety and reliability and the fact that we tend not to drive as much in our later retirement years. For younger driv- ers, the considerations are very different. For all clients, regardless of your age, please call me if you or your parents are in need of new car. I am happy to review all considerations with you to determine the optimal choice for your next car purchase or lease! p