Suze Orman Calls Car Leasing The 'Biggest Waste Of Money' And Advises To Buy Rather Than Lease
Personal finance expert Suze Orman advised the host of CNN's "Who's Talking to Chris Wallace" show that leasing a car is a waste of money, so buying one is better. Here's why.
During her November appearance on the show, Wallace asked Orman whether it was better to lease or buy a car and told her that he leases a car. Orman did not hold back, telling Wallace why she believed leasing a car was not a good use of his money. Instead, she believes that buying the car is the better option.
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"Leasing a car is the biggest waste of money out there," she said. "If you keep it the entire time, [for] the life of it, if you take good care of it, [you will save money]. My car is going to be good for another five years. I just think it's better to buy."
This isn't something new from the finance guru, who has reiterated her stance on buying over leasing vehicles over the years. In 2018, Orman appeared on CNBC's financial show "Make It" and explained that with leasing cars, you're pouring money each month into a car that you don't own and when that lease ends, you'll have nothing to show from it.
"If you rent a car, you're going to rent a car year in and year out," she said.
Wallace said leasing makes more sense for people who don't want to deal with older cars and the repairs that come with them. You also can lease a luxury car you may not be able to afford to buy. Leasing also is an attractive option for drivers who want the advanced automotive features new cars offer.
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Another reason Wallace said he prefers leasing over buying is that he gets a new car every three years. Because he never exceeds the leasing mileage limit, his overall payments are less than the payments would be if he financed the vehicle.
Orman disagreed.
"You only get to drive at 12,000 miles," she said. "You have to have a lease gap insurance. Why don't you do what I do? I bought a car."
Orman said buying a used car is best because a vehicle never increases in value, making it a "lousy investment." This means choosing a reliable car over unnecessary bells and whistles.
Leasing a car is attractive to some people because it offers lower or no down payments with less expensive monthly payments for luxury vehicles. Orman understands that leasing is a more financially available option for some people, which is why she said financing a car is the next-best option instead of leasing.
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When financing a car, Orman said it's important to make sure that you pay it off within three years. If you can't, it's a signal to purchase a cheaper vehicle. In a 2017 blog post, Orman said buyers should spend the least amount possible on a car because paying less will help them pay off the car faster.
Once the car is paid off, Orman advises hanging onto it for as long as possible. She keeps her cars for 12 years, which frees up money to be spent on other things like investments, saving for retirement or paying off debts.
Orman said that if you follow her advice and buy a car with a three-year loan instead of leasing, you'll own the vehicle after those 36 months. Depending on your mileage and how well you take care of your car, you could keep driving it for at least another seven years without committing to another loan payment.
While leasing is an option for people seeking cheaper monthly payments, lower down payments and perhaps do not drive as often, buying can put you financially ahead in the long term.
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