Dave Says: Buy It, or Turn It In?
Dave Ramsey - September 11, 2012
Should I buy my car when it's up for lease, or save for paying off other debts?
I made the mistake of leasing a car a while back, and the lease is up in about nine months. Should I save up the money between now and then to buy it, or save as much as I can to pay down my student loans?
At the end of a lease the price for which you can purchase the car is called the residual value. This amount is preset when you lease the vehicle. So the big question right now is, what’s the car actually worth?
If the company thought it would be worth $12,000 and it’s actually worth $14,000, that would be a good deal, and you’d want to buy it instead of turning in the car. Even if you were going to turn around and resell it, you’d still want to go ahead and buy. Another big thing is that I’d never tell you to finance a car after the lease term. There’s no difference between that and walking onto a car lot and financing any other $12,000 car.
Look at it this way. You basically have a $12,000 car loan right now, and you’d only be changing the format from leasing to payments if you financed the thing. Should you keep this vehicle? Only if it’s a small percentage of your income. If you make $60,000 or more, I’d probably say save up, pay cash, and keep the car. But if you’re making closer to $30,000 the answer is no.
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