Leasing Vs Buying A Car - Dave Ramsey

Martis with us in New York hey Marty welcome to the Dave Ramsey show hey Dave how are you better than I deserve what's up I'm gonna show been binging on your podcast for a couple weeks I've been lovin it okay um I have a quick question for you um should i my lease is on my car is up this month the hotel shy lease a car or should I buy a reliable used car but so these payments for the car would be relatively cheap it's not you know not a BMW you know like a $200 all everything you know roll Ventura no no fees do at the beginning at the signing Johnson what would you do III really appreciate you calling and asking the question is because it's a great question that's on the top of a lot of people's minds so here's the thing leasing a car is an alternative form of financing a car so if we were to take the actual lease payments on the average lease in your case $200 right and you were to take the buyout at the end of the lease those are the two financial numbers you would need to put into a financial calculator and then you compare that with the sticker price of the car the manufacturer's suggested retail right you would find that this money that you're borrowing that you're renting is costing you on average 14.2% that's the average lease yield now Elyse is not technically borrowing money so the Federal Trade Commission does not make them reveal that to you or this a car loan you'd get this little ridiculous federal piece of paper that shows you exactly what your money is costing you what your annual percentage rate is and if they were to do that on a lease you would find the typical lease it varies but I'm saying the typical lease is around 14% and I've analyzed these things for 30 years and looked at them and run them through the financial calculator Smart Money Magazine did a full expose on them consumer reports that a full expose consumer reports actual comment at the end of their full piece of research on a whole bunch of leases that have much more thorough job than I have done said the moat their quote at the end of the article was the most expensive way to operate a vehicle is to lease it and this is even if I'm gonna finance a car in a five-year payment plan or something like that well number one I'm gonna tell you don't finance anything and if you did coming out of this I'm going to tell you to we'll come back to that in just a second but I'm gonna tell you to pay it off as soon as possible not for five years because that's the second part of our equation and then we'll come back in all the years I've been working with people who started from nothing and built wealth we call them everyday millionaires they started from nothing and became wealthy they typically say one of the things that turned their life around was they started asking when they started looking at purchasing something they started asking how much so rich people ask how much broke people and I've been both brother okay broke people ask how much down and how much a month in this entire conversation all you've talked about is how much down how much a month so you got to stop that dude you got to start asking how much because that's the part that kills you how much down how much a month says I'm gonna be in debt to the man and I'm gonna pay payments to the man the rest of my life and I'm gonna be normal which sucks and you don't want to do that so we we broke down the lease is a bad idea how much looking at analyzing these decisions based on your monthly rather than the total purchase price is a bad idea now let's back up and look at your particular situation how old are you and what do you make okay thirty years old and I'm thinking about say 125 between being my life oh good for you great congratulations that and so much money will you have so much money do you have saved not counting retirement so I'd say 25 25 thousand if like a little emergency fund or little miscellaneous savings account with twenty five thousand bucks in it yeah okay and the used car you were considering purchasing was how expensive what was the price on it I'm looking round by the phase fourteen fifteen thousand okay just riding you I would just write a check and right out of your twenty five and then you ready check right now when you get ready to turn the lease in right when you get ready to do that you got twenty five thousand dollars by a fifteen thousand dollar car that leaves you ten thousand dollars then your next order of business in your budgeting and financial plan is to rebuild your emergency fund because 25 is probably about the right amount and I want you to get it back up there do you have any other debts not counting this car situation I'm on the student loan but that's you know my parents are taking care of that so is it in your name was Ernest relatively well it's in my name how much is this relatively low my whole schooling was like 35 grand how much my parents how much is in your name in student loan debt I don't even know but I would go ten fifteen thousand okay well I would love for you to go get that rid of that as soon as you can - okay and so would your mom and dad by the way you make a hundred twenty five thousand a year I appreciate that they're taking care of it if they're a day late it dings your credit if they're a month late it starts to step on your credit if they get in a real trouble it's your loan you're gonna end up paying that's the legality of it and so if I were you I would want that cleared out of my name as soon as possible hey men appreciate having you as a new listener

Channel: The Ramsey Show - Highlights

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Id: JkTteUjmZUw

Length: 5min 51sec (351 seconds)

Published: Thu Nov 07 2019