Why the Middle Class Should Lease Cars
One person wrote in: “I had a $30K car for ten years, no payments for five and sold it for $10K. By not having a lease payment for the final five years of owning, I saved 18K. Yes, I had 3K in maintenance, but I still saved 15K. Add in the 10K from selling it and that is 25K. So it only cost me $5K to own a $30K car for ten years. Not bad for a depreciating asset.”
The middle class mindset is all about saving what little they have, not about creating. What about the first five years? No matter what your payment schedule is, you are putting more money up front. When you buy a car you put cash in the beginning into it. There are two ways to look at it:
- You are paying 5K over 10 years to have a 30K vehicle.
- You are paying 30K over 5 years for a 30K vehicle that you could have leased for 18K.
Option 2, leasing for 18K, saves you 12K of cash over the first 5 years. Cash is king. The average person thinks about what they can “save” over the final 5 years. The rich think about how they can invest in what they save the first 5 years. Let’s say you invest 12K into something that will bring you income. The question becomes how much income can you produce with that 12K investment over the next five years.
Look at it from a 10-year perspective. It’s true that by leasing I will pay 15K more over the final 5 years than if I had bought, assuming only minor maintenance for the buyer. But the person who leases can turn every dollar that they save in the first few years of that time period into something they can invest in that will produce income for them over the next five years.
Is it better to have 12K earlier to invest or have 18K later of savings? Not considering inflation, it depends on what you can do with that 12K up front.
To take another example, someone else commented: “I paid $9500 for a 2006 Chevy pickup in 2009. I’ve spent MAYBE $1000 worth of maintenance and repairs over 7 years. So $12500 for 7 years’ service with a wholesale value of $4800. That means if I sold it today, my monthly cost to own was under $92.”
The middle class doesn’t add in the cost of owning with money that they could have saved by leasing in the beginning and investing it into something that brings them other streams of income. The question is not just calculating what the monthly cost to own is over a given time period versus leasing. This leaves out all income producing scenarios.
This is not counting all the other things I already went over in detail in my previous article on the benefits of leasing. It’s not about building equity, it’s about what will make you the most money.
Leasing is more favorable for cash flow.
The middle class looks at the cost of things. It is impossible to create real wealth just by saving money on a middle class income. When the wealthy throw money around on ridiculous things — cars, boats, planes, vacation homes, it no longer matters that the things are poor investments, because the money they are spending is minuscule compared to the abundance they’ve created.
In reality, anyone worried about spending $300 a month to use a car and not have it build “equity” will never create big boy money because their focus is not on creating more income.
The middle class is concerned about a couple of hundred dollars when they should have their mind on a couple of million dollars.
I encourage everyone in the middle class to get on Cardone University and get themselves out. There is no freedom in the middle class, it will continue to be squeezed, and buying a car instead of leasing one will not get anyone rich.
Don’t blame the messenger,