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.
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?