What Did Your Money Get You?
Here is something essential to remember about the apparent lower cost of leasing versus buying new: At the end of a leasing cycle, you don’t own the car. Generally speaking, you have to start a new lease-or-buy cycle.
But if you’d bought a new car and were now at the end of the ownership cycle, you’d have a 6-year-old vehicle that would have about 72,000 miles on the odometer. It would have depreciated an estimated 66% and be worth about $11,136 as a trade-in, according to Edmunds data.
If you’d bought a used car, it would now be around 9 years old. It would have about 108,000 miles and be worth about $5,968 as a trade-in — a depreciation of roughly 73%.
You could potentially earn a couple thousand more dollars by selling your vehicle to a private party. But most people are likely to opt for the convenience of a trade-in at a dealership.
When we deduct that used car equity from the out-of-pocket costs of acquiring the car, the long-term cost picture changes. Buying new becomes a better deal than leasing. But buying used is still the thriftiest way to go.
|Buying Used||Buying New||Leasing|
|Final costs with equity||$18,367||$21,330||$29,882|
In this basic comparison, if you’d leased two compact SUVs back to back, you would have paid $8,552 more to drive them for six years than you would if you bought a new vehicle.
If you’d bought a used compact SUV, you would have saved $11,515 over leasing during this six-year cycle. Buying used rather than buying new would have saved $2,963.