For my entire driving life, I’ve had a leased car.
First, it was a 2002 Honda Accord, then a 2006 Honda Accord, then a 2009 Honda Accord, then a 2012 Honda Civic, my current ride. Can you tell I’m a Honda girl?
When I leased my current car, I was just starting to dip my toe into the PF world. I’d heard that leases were a bad idea, but at that point I didn’t care. I needed a reliable car and a low payment. I didn’t have any savings. More than anything, I wanted to establish myself financially without relying on my family. With a reasonable payment and a great track record with Hondas, I felt comfortable signing on the dotted line.
My lease is up in January and I’ve decided to buyout my lease. Apparently people don’t do this very often. My finance guy at the dealership said about 15% of people buy out their leases. Most just turn in the car and get a new one. With everything I know, it seems like buying out the car is the best option for me. Here’s why:
1. My buyout price is lower than the value of the car.
My lease was for 12,000 miles per year and I drove around that for the first year, but dramatically less than that the last two years. I’m averaging around 5,000 miles/year lately. Because of this, I’m under mileage and the value of my car is high. There is no damage on the vehicle and I’ve taken great care of it. If I wanted to get a different car, I’d have to pay much more or get much less.
2. Interest rates are stupid low right now.
My interest rate for my 3 year car loan is 0.99%. When my banker told me that, I laughed at him. What’s the point of paperwork if the interest rate is only 0.99%? He should just lend me the money and I’ll pay it back at my convenience.
3. I didn’t want to save for the car.
The car loan is for $13500. I could have saved up that amount of money but I deliberately chose not to. Saving for my car would have diverted funds away from my student loans. My student loan interest rate is 6.55%. My savings account earns an awesome 0.75% (this is actually awesome, I’ve only heard of a few places in the U.S. that offer better savings account rates). As you read above, the interest rate on my car loan is stupid low. The math made sense to attack my student loans instead.
(I did write a check for $1378 at signing to cover title, tax and my license tabs for the next year. No trip to the DMV for this girl!)
4. I like the car.
This is important. I have no issues with my car right now. It is in great condition, does everything I need it to do and it gets excellent gas mileage. I also expect it to last a good, long time. What else could I ask for?
I’m excited to transition from car leaser to car owner. It feels very adult of me.
Now I just have to decide if I want to accelerate my car loan. At this rate, there is no reason to pay this thing off anytime soon.