The Difference Between Buying and Leasing Cars

buying and leasing carsThe following is a guest post from Tammy Lee Dawson. If you’d like to guest post on Budget Blonde, please e-mail me at Cat[at]BudgetBlonde[dot]com.

Editor’s note: This post was pretty timely since a few days ago I revealed that I spend a whopping $500 on my car lease in Grenada every month! Crazy! So, when Tammy pitched this topic, I was all for it. Enjoy!

Cars – for some it’s a luxury and, for many, it is considered a necessity. Either way, it can be quite a purchase and, if not taken care of properly, can shape the state of your finances for years to come. Many individuals are leasing vehicles with the hopes of reducing spending, which got me thinking:

Is leasing REALLY the more cost-efficient option?

After doing some digging, the answer I came up with is “maybe”. Depending on your lifestyle and preferences, there are factors that dictate whether it is wiser to buy or lease your next vehicle.


It starts off with a very low or no down payment, which extends to lower monthly installments and different warranties. For people, who regularly like to change their cars (e.g. in 3 to 5 years), leasing is the perfect opportunity. It saves the hassle of maintaining the car and selling it off.

To get a car on a lease is relatively much easier than getting a car loan and allows you to enjoy any car’s optimal years of performance and later move on to another, better or an upgraded car. Due to the smaller down payments and independence from maintenance, you do not have to restrict yourself to the cars that you can afford; instead you could enjoy the luxury of different cars for a short amount of time. However, let’s not forget that, even if you have been leasing a vehicle for ten years, you will have nothing to show for it the moment your payments stop. Also, there are preset terms and conditions that limit the car’s use, starting with the fact that every extra mile beyond the agreed mileage costs extra. The insurance premiums are significantly greater and in case of a major accident, they only pay for the residual value which may not be sufficient to cover up the amount you owe to the leasing company. Since the agreement may be as long as 10 years, you need to ensure financial stability and the inability to maintain the agreement would result in a serious penalty; in recent times though, companies like Lease Trader actually allows individuals to take over their lease, much in the same way someone sublets an apartment.

While leasing is great for many different living situations, it is particularly ideal for those who move around a lot for work or pleasure, or don’t want to worry about the hassle of upkeep.


The primary concern to buy a car is to arrange the required finances. Even if you do not pay the complete payment upfront, you would still have to make a significant down payment and follow this with monthly payments. The nice part, though, is that after a significant amount of time, you will own the vehicle you’ve been paying for. Your credit score will play a significant role in your ability to get a car loan and the monthly payments that accompany it. If your history is not yet fully established or is less-than-ideal, you’re not completely out of options, since there are companies like Auto Credit Express that help people get loans even if they have poor credit.

So, if you’re someone who takes good care of things (and cars), buying may be a viable option. After all, if you keep the vehicle in tiptop shape, it will suffer little depreciation and can be sold at a future date. Furthermore, there is the added advantage that the insurance premium on bought cars is relatively lower.

Essentially, there is no clear cut answer on whether buying or leasing is more financially sound. If you need a car now but cannot guarantee that it will be needed three years down the line, leasing may be the route to go. However, if you have settled into a rhythm and want a more lasting solution to your transportation needs, taking the leap and buying a car may be the wiser move in the long run.

So what do you think? Have you ever leased a car? I know the general consensus in the PF community is that it’s a bad idea, but I feel like it works for some.

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3 Ways to Travel the World for Free

travel the world for freeIf this blog has proved anything, it’s that you don’t have to spend a huge amount of money to travel. In fact, you can travel the world for free (or at least get one big chunk of your vacation for free!)

Basically, if you are willing to try something different, you could get to see some of the world’s most beautiful beaches and coolest cities for a fraction of what some people pay. Here are some ideas:

House Swapping

House swapping is becoming more popular, and I’ve actually had a few friends find success with this method. This is where you swap your property with someone else in another country or city. You obviously need a house to swap for a week or two, but that’s it. You save so much by not having to pay hotel costs when you are away, and most houses have Internet, TV, and a kitchen where you can make your own food.

Of course, not everyone has a suitable property for house swapping, so it really depends on the city you live in, but if you do, be sure to use caution when choosing someone to live in your place!

Do Charity Work Abroad

If you want to do something more involved, then volunteering to go abroad and do charity work such as building schools or digging wells can be a good way to really make a difference. However, this sort of work often takes a long term commitment of a year or two. You can go for a shorter period, but this involves doing fund raising for the project. The peace corps, just to give one example, is a two year commitment, and while you do get paid, it is only a small amount. However, you get to see parts of the world that others don’t!

Work On A Boat

The other day I ran into two girls who were at a local restaurant. They were wearing uniforms like they were working on a boat, so I asked them which one they were with. They pointed to a massive 150+ foot yacht. It turns out they were European and they were sailing around with this boat as servers for the boat’s guests. Sure, they had to work, but they also got to explore Grenada while they were here! You can do the same thing, or if you aren’t interested in working, you can book cheap flights to Tenerife in the Canary Islands or Barbados or visit your friend Cat in Grenada! ;)

What are some other ways that you can travel the world for free?

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