Originally posted on the Christian Post on March 23

Dear Chuck,

I’m in the market for a car, and I’m trying to decide between owning and leasing. I’m just out of college and want to keep my obligations low, and I’ve heard that leasing can be really cost effective. There are lots of great deals and promotions advertised for leases in every car commercial, making it seem like it’s worth a try. What do you think?

Looking at Leasing

Dear Looking,

I think leasing is a bad idea for most folks. Let me explain why and and provide a better option.

The constant stream of beautiful advertisements telling Americans that a new car can easily and cheaply be yours is one of the reasons that car loan debt has grown every quarter since 2011. With car debt in the billions and defaults on car loans on the rise, it’s clear that too many people let their passions drive their purchasing.

Step one before deciding about a car is this: Turn off the television!

Step two is taking a look at your budget. At Crown we remind people to consider that the cost of a car includes maintenance, payments, repairs, gas, tags, taxes, and insurance – and that shouldn’t exceed 15 percent of your net spendable income. When deciding whether to purchase a new car, purchase an older car, or lease, consider the costs of each.

Let’s weigh the pros and cons, keeping in mind this truth: a car is an expense. No matter your choice, money will come out of your pocket in exchange for transportation. The question is how much and what other benefits are you buying.

COSTS OF LEASING: Young people just entering adulthood are most intrigued by leasing. “Millennial car buyers are more likely to lease a car than Generation X and baby boomers,” according to CNBC, and often Millennials choose to lease luxury vehicles. One of the reasons is when leasing, it’s possible to “afford” more car than you can when you buy. You are paying for the depreciation of a car that you don’t own and must give back, compared to buying a car outright in which you pay for the entire value of the car.

US News explains it like this:

“Say your dream car is a new SUV that costs $30,000, you’re able to put 10 percent down ($3,000), and don’t have a trade-in. You’ll need to finance $27,000. With any lease, there will be a predetermined residual value. Let’s say, for our example, that it’s 55 percent, or $16,500. That means you’ll only make payments on the $13,500 worth of use that you’re expected to get from the vehicle. That’s half the price of the outright purchase.

It’s not quite that simple – both types of deals generally come with fees that need to be included in the math – but that gives you an idea of why lease payments are generally lower than financing payments.”

But let’s be clear, though leasing may cost less, it’s not necessarily that much less. Currently, the average car loan is $493 per month, compared to the average lease payment of $412. And there can be hidden costs.

Before you lease, ask yourself whether you are trying to get into something you can’t truly afford just to keep up appearances. Galatians 6:4 advises, “Each of us should test our own actions. Then they can take pride in themselves alone, without comparing themselves to someone else.”

COST OF BUYING NEW VS. USED: Reliability, repair and fuel costs are three key reasons people often want to buy new rather than used. Monthly repairs for the typical American’s car (about seven years old) cost about five percent of a family’s budget while a new car costs about 15 percent. Thus it’s cheaper to keep a reliable used car running than buying a new car. In both cases, there is a price to owning the car. But while you may have some maintenance issues with a used car, you’ll likely have payments with the new.

In today’s American budget, so many are hostage to long-term loans. Experian reported last year that the average term for an auto loan is a record-breaking 68 months with average payments nearing $500. People are paying more and staying in debt longer for cars than ever before.

I found it sad to note that Experian reported more than 85 percent of new car buyers used financing, along with more than 55 percent of used car buyers. Debt is a dead end for anyone. Proverbs 22:7 observes, “The rich rule over the poor, and the borrower is slave to the lender.”

My advice is to avoid expensive new cars whether leased or bought, and instead buy used AFTER you’ve saved the cash to pay in full. This will take more time and some research, but as someone who is happy to drive and purchase used cars, I can tell you that the peace of mind from less debt is worth the wait.

You can learn more about how to manage your finances with Crown’s Money Map. And if you’re looking for a little encouragement in the year ahead, please accept this gift from Crown. You can receive practical principles and daily encouragement from God’s Word in the God is Faithful devotional, sent straight to your inbox to consider what God has to say about our daily life.