Author: Stephanie Richman
As a Certified Financial Planner™, I’ve been asked many times whether one should buy a car, or lease one. As I evaluated purchasing a new Tesla for myself, I wanted to share three main things to consider – the numbers, how you feel, and the technology.
Spoiler alert: I went with a lease. But you might decide otherwise.
The math, as well as the satisfying feeling of ownership, are on the side of buying a car…
My cost for a three-year lease on a Long-Range Tesla 3 will be $25,036.19. The residual value at the end of the term is $32,864.70. So, the total cost if I could  buy the car at the end of the three years would be $57,901.
The cost to buy the same car with cash would be $52,542.
Buying the car using a four-year car loan with today’s average rate of 4.46% and 20% down works out to $56,310.
So, whether you pay cash or borrow, it costs less to buy the Tesla rather than lease it!
If you like to drive new wheels every three years and you can afford to have a car payment that never stops, the higher cost of leasing may be worth it for you. Perhaps you’re in the fortunate position of the numbers not making a meaningful difference to your long-term financial health. (Your financial advisor can help you assess this.) Then go ahead and lease. No shame in that.
While numbers versus the benefits of perpetual newness are what we usually weigh when deciding to lease or to buy, today there’s also something else to consider. It comes up in every conversation I have about cars today – and that’s the “technology.” It’s changing so fast. Especially if you’re considering going electric or plug-in hybrid. Today, the choices you have in the marketplace are still limited. But wait and you’ll have more – right? Wards Intelligence and LMC Automotive think so, stating “Non-gas car models likely to nearly triple by 2025.”
So, if you’ve bought cars in the past because you agree it makes economic sense, but you’ve decided it’s time to be more eco-friendly, you may not feel like committing long-term to one of the few vehicles available today. In this case, maybe it’s time to lease until there’s more choice.
I mean hey – there will be more cars, better battery technology, more range, and so on. And, then you can buy when you’ve found the right long-term car for you. That way you’re taking all factors into account: The math, how you feel, and the technology. Vroom…
 Currently you cannot purchase a Tesla 3 at the end of the lease term. But we’ll assume you can for illustration.
 $48,990 + 7.25% Sales Tax. 7.25% is the average sales tax in California.
 Wall Street Journal 1-3-2020.
 $52,542 – 20% down payment means you’ll finance $42,034. You’d make payments of $954 per month or a total of $45,802 + $10,508 down for a total of $56,310
 Source: 2-16-19. Wards Intelligence and LMC Automotive. Credit to Thomas Wilburn/NPR.
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