I lease cars: The Dark Cloud of the PF World

I don’t claim to be perfect when it comes to money. We all have our own issues and idiosyncrasies. One of my issues seems to be the dark cloud that continually hovers over Eeyore in the Hundred Acre Wood.

My Dark Cloud? I lease cars.

Or more correctly, I am a recovering leaser and Hubs still leases.

C from the The Single Dollar called me out in a comment on my leasing tendencies. In the spirit of transparency, I want to explain why I leased and why Hubs continues to lease. Here’s the scoop.

To make sense of the logic, we have to back up a bit.

My Story

Let’s go back to my first car, a 2004 Honda Accord. How did I acquire this car? $0 down $0 per month! My car, car insurance and gas was all paid for by my parents. I had it good. #roughlife

In 2008, after my first 3 year lease ended, I got a new car. A 2008 Honda Accord. Again, the car, my insurance and my gas was paid for by my parents. As nice as it was to have a brand new car, this car is the root of all of my car insecurities. It had some sort of wiring issue that drained the battery. In 3 years, I went through 3 batteries. A car battery is supposed to last 4 years! I went through 3. Not a good sign. I was so happy to get rid of this car.

The common factor that you’ll notice between car 1 and car 2 is that my parents paid for everything. In 2012, I was trying to establish my own financial life. I didn’t want to be dependent on my parents any longer. I was an adult, it was time to act that way! Unfortunately, I had two factors working against me.

1. Because of the 2008 Accord battery issue, I had little faith in automobiles. I felt that all cars were inherently defective. I figured, the newer the car, the fewer issues the car might have.

2. I relied heavily on my parents for financial help. When times were good, I could get anything I wanted. (Lucky for Hubs, I don’t want or need much.) By having everything handed to me, I didn’t have a hustle muscle. I was told my entire life that my job was to go to school and get good grades. I worked and I worked hard during the summer, but I didn’t have a good (or decent… or anything less than horrible) way to handle school and work at the same time.

When my 2008 Accord came off lease, I was in the middle of law school. Around this time I was “working” while trying to manage school, but my job was an unpaid internship. I was already burning the candle at both ends, learning how to balance work and school. I was not confident in my ability to earn extra income to cover a full car payment and I didn’t want to take out any more in student loans.

Both factors worked together for me to choose a new cheap car. Cheap was qualified in terms of the monthly payment, not the overall cost of the car. Under that mindset, the easiest way to get a new and cheap car is through a lease. In 2012, I downgraded from an Accord to a Civic because it was still a reliable Honda but it was cheaper.

In late 2014, when my current car came off lease, I bought it and by bought it, I mean financed it. It’s been a good car and it is under mileage. As I wrote here, I already had equity in the car when I financed it. However, to buy it with the terms that I wanted and got (1% interest FTW!), my payment went from $242 with the lease to $383 for the 3 year loan.

I don’t know about you, but $383 feels like a really high car payment. But I also know that it’s only for 2.5 more years. Then I will own my under mileage car. In 2.5 years, Hubs’ car also comes off lease… which leads us to Hubs Story.

The Hubsmeister’s Car Story

Hubs’ car story is the complete opposite of mine. Until he met me, he had never owned or leased a new vehicle. Instead, he bought <$5000 cars. When I met him, he had a 2002 Chevy Impala that was nothing but trouble. He purchased it in the fall of 2008 and it quickly turned into a money pit. For only being 6 years old, the car had so many problems. He had the car for roughly 3 years before he gave up on it.

Before the Impala, he bought a van (which I heard was awesome!). The van was alright for the first few months, but things went south quickly. Within the first year of owning it, the engine seized up and the transmission was shot. Hubs is still pissed about this.

Between the Van and the Impala over those 4 years, he paid a lot for those two vehicles. Both vehicles were in and out of the shop. When the Impala was on its last legs, he wanted to get away from his used cars and their expensive problems. This happened at the same time that I was trying to establish my financial independence, so we didn’t have extra cash or cash flow to buy a new car with a bigger payment. Our cheapest short term solution was $202 for a leased Honda Civic.

Now that we are on our way to sound financial management, we are shifting to purchasing cars and owning our cars outright. His current car, a 2014 Honda Civic, was leased while I still had student loans. We wanted to keep our cash flow free-flowing and a lease made sense at the time. His current payment is $207 and that feels good for now.

Leasing isn’t ideal but it worked for us when we need it.

I don’t want us to have a lease payment after Hubs’ current lease is up. While writing this, he informed me that he really likes leasing and doesn’t want to go back to used cars. He’s open to buying out his current car. Maybe I can talk him into a car that’s 2-5 years old. Whatever we decide to do, I enjoy the challenge to continually optimize our expenses. It’s all a learning process.

Have you ever leased? What is your financial Dark Cloud?


11 thoughts on “I lease cars: The Dark Cloud of the PF World

  1. I would like to clarify that my comment was made in the spirit of inquiry, not judgment 🙂 I’ve literally never known anyone in my entire life who leased — I think maybe it’s more of a suburban thing? I dunno. So I was curious what made people decide to do that 🙂 I can definitely see how you ended up doing this. But it also seems like now that you’re much more financially stable, the decision to buy your car and drive it for presumably a very long time makes more sense. Hopefully your husband will feel the same at the end of his term!

    • No judgment felt. 🙂 When you asked, I’d never thought it all the way through and I enjoyed the challenge of the mental exercise. Why do we do it? What are we ignoring if we keep doing it? Looking back, it made sense at the time and I wouldn’t change anything. To get on my own feet, it was a struggle to come up with $200/ month, let alone $400/ month. This is also my olive branch to others who lease but are new to PF. Figuring out what to do for transportation is hard, especially when you are trying to set yourself up as independent.

      and yes. Totally suburban. Public Transit was nonexistent.

  2. Currently, we lease two electric cars, which I’m going to write about soon. What it came down to was expense–we got a deal on leasing cars that made them cheaper than our used gas-powered cars. I love leasing our smart cars!

    • You have electric smart cars? That’s so cool! I didn’t even know they made those. Just checked it out and the mileage is awesome! Will you but it out at the end of your lease?

      My parents had a Passion ForTwo. It was certainly fun to be spotted in that car!

      • Oh I love a good convertible! Because these cars are new to our area, we had to settle with what on the lot. I’ll tweet some photos soon. With the battery’s lifespan, it’s cheaper to lease another at the end of the lease. Since these are commuter cars, we should only require one more lease. 😉

  3. No shame in this. Leasing made sense for you guys when you made these decisions. Our two cars (already a PF no-no) were both new (a bigger no-no) when we financed one (bigger still) and paid cash for the other. And we don’t regret it. We’ll drive the 2004 Civic til it dies, and same goes for our Subaru, though we’re racking up miles quickly on that one.

    • CIVICS! Woot!! Cars are so weird in the PF world. Nearly everyone starts off on the PF No-no foot. It’s just a matter of time until you get to a”better” foot. What makes the most sense financially at the time may not be what the masses preach and that’s okay.

      I hope your Civic and Suburu lead long healthy lives. 😀

  4. I’ve never leased a car, but my first car was a Ford Escort and that thing was a piece of junk, which made me wish I had leased it so I could give it back to the dealership! 😉 My current car I purchased back in 2005 and it has been paid off for over 5 years! I am going to try to do everything I can to hold on to this car, lol…

    • Turning it back into the dealership is my favorite part about leasing. “Hi, this is your problem now! *runs away laughing*” Sounds like that would have been a nice option with your Escort. Glad to hear the current car is humming along nicely. I’m 2.5 years from having my car be paid for. Then I want to drive it for-ev-er.:)

  5. If I’m being totally honest, we average approximately $200 a month on driving an old car (long term repairs and replacement costs being taken into account).

    We paid $3.5K out of pocket ($4K was because somebody totaled our other vehicle) three years ago (Already $100/month, but going down), and we spend close to $125 on maintenance and repairs. So yeah, it’s going to take about 10 years to catch up to a $200 lease. Actually 6.5, but who’s counting.

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