It was Christmas Eve, and the family had gathered for our traditional Christmas dinner—a time of year I treasure the most. My kids, all talented cooks, filled the house with the incredible aromas of soul food dishes, laughter, and the joy of being together. The celebration was even more special as we welcomed our fifth grandchild, a beautiful addition to our growing family.
Welcome to The Eric Frazier Show, where we discuss Faith, Family, and Finances. I’m Eric L. Frazier, MBA, and today I want to address leasing versus financing a car and what I think you should do.
Amid the bustling kitchen activity and the comforting smells of pies baking and macaroni and cheese bubbling in the oven, my son-in-law made a surprising announcement: “I’ve done my research, and I’m ready to buy an electric car.” Then, excitedly, he declared, “Let’s go check out the new Ford Mach-E!”
What do you do when your son-in-law drops a bombshell like that on Christmas Eve? You grab your coat, leave the warmth of home, and head to the dealership. We drove out to San Bernardino, California, where the bright car lot lights illuminated the sleek Ford Mach-E. With its futuristic design and cutting-edge technology, the car was impressive—a testament to American innovation.
After a test drive and some negotiation, we sat down to crunch numbers. Walking into a dealership is like entering a battlefield—you have to be sharp and cautious. Car salespeople live by their commissions and are trained to close deals, but I was there to ensure my son-in-law made the best financial decision. With a newborn at home, this purchase wasn’t just about luxury; it was about what made the most sense for his family’s future.
The Big Question: Lease or Buy?
We reviewed two options: leasing or financing. With an MSRP of $55,000, a $10,000 down payment, and a stellar FICO score of 800, my son-in-law qualified for the best rates. Here’s how the numbers looked:
Leasing:
-
After a generous $11,000 manufacturer rebate, the lease payment was around $350/month for 36 months.
-
The residual value at the end of the lease was $24,500.
-
Total cost over three years, including the down payment: $41,700.
Financing:
-
At 5% APR for 60 months, the monthly payment would be approximately $849.21
-
Total cost over five years, including the down payment: $60,952.33
-
At the end of the loan, he would own the car outright, with a potential resale value of $20,075. The net cost would be approximately $40,000.
The Tax Considerations
If he started a home-based business, which he currently does not have, both leasing and purchasing would have tax benefits:
-
Leasing: He could deduct a percentage of lease payments based on business use, potentially saving thousands over three years.
-
Purchasing: Section 179 and bonus depreciation could allow him to deduct a significant portion of the purchase price in the first year. By the way, it’s very easy to start a home-based business and receive these tax benefits!
However, these benefits depend on the car being used primarily for business, and they don’t always outweigh the financial burden of taking on debt.
The Best Option: Neither
After analyzing the costs, tax benefits, and long-term implications, the best financial advice is clear: neither leasing nor financing is the ideal choice. Instead, he should pay cash for a reliable, late-model used car.
Here’s why:
Debt is the Enemy
Debt is more than a financial obligation; it’s a weight that slows you down. Life is unpredictable, and unexpected events like job loss or medical emergencies can make debt unbearable. Avoiding debt frees you to navigate life’s uncertainties without financial strain.
The Risk of Over-Leveraging
Even with excellent credit, no one is immune to hardship. Falling behind on car payments can lead to repossession and a damaged credit score. Is the risk of losing financial stability worth the thrill of driving a brand-new car?
The Freedom of Living Debt-Free
Owning a car outright eliminates the stress of monthly payments, freeing up income for savings, investments, or your family’s future. A debt-free life is a life of opportunity and peace.
The Practical Alternative
Instead of leasing or financing, I advised my son-in-law to:
-
Save an additional $2,000–$3,000 to add to his $10,000 down payment.
-
Purchase a reliable, late-model used car with a proven track record of longevity.
-
Have the car inspected by a trusted mechanic before buying.
Modern cars, especially well-maintained American-made vehicles, can last 300,000–400,000 miles, making them an excellent investment.
Debt-Free Is the Way to Be
Debt is a thief of opportunity. Financing cars, clothes, or even vacations is the opposite of financial freedom. As Proverbs 22:7 reminds us:
“The borrower is a slave to the lender.”
The goal is to live free of financial bondage, focusing instead on wealth-building and securing your future.
The Decision: He Leased the Car
Despite my advice, my son-in-law chose to lease the car. He felt confident in his financial stability, employment, great income, low debt-to-income ratio, solid savings, and excellent credit. He negotiated a fair deal and secured a favorable lease rate. These advantages come with financial discipline, and I respect his decision.
However, the core principle remains: Leasing or financing a car redirects money away from savings and investments, which could otherwise grow his wealth.
Final Thoughts: Lessons for the Future
If you haven’t read The Millionaire Next Door, I strongly recommend it. Wealthy people don’t finance cars—they buy used, pay cash, and let their money work for them.
Too often, what we perceive as wealth is actually financed extravagance: cars, clothes, and jewelry bought on credit. Don’t fall into that trap.
Start today. Build a debt-elimination plan. If you haven’t purchased a home yet, that’s one exception where debt may be necessary—but even then, it must be approached responsibly.
Consult a financial counselor or, better yet, talk to me. Because the best gift you can give yourself—and your family—is financial freedom.
Eric Lawrence Frazier MBA
President | CEO
The Power Is Now Media Inc.
800-401-8994 ext. 703
Direct: 714-475-8629
California Real Estate Broker
CA DRE: 01143484
Texana Bank Mortgage NMLS:
Mortgage Originator NMLS # 407536
NMLS: 461807
Appointment Calendars:
Homebuyer consultation: https://calendly.com/ericfrazier/homebuyerconsultation
Homeseller consultation: https://calendly.com/ericfrazier/realestateconsultation
Real Estate Agent Consultation: https://calendly.com/ericfrazier/agentorientation
About The Power Is Now Media: https://www.thepowerisnow.com/about
Should I lease or Buy a Car?
It was Christmas Eve, and the family had gathered for our traditional Christmas dinner—a time of year I treasure the most. My kids, all talented cooks, filled the house with the incredible aromas of soul food dishes, laughter, and the joy of being together. The celebration was even more special as we welcomed our fifth grandchild, a beautiful addition to our growing family.
Welcome to The Eric Frazier Show, where we discuss Faith, Family, and Finances. I’m Eric L. Frazier, MBA, and today I want to address leasing versus financing a car and what I think you should do.
Amid the bustling kitchen activity and the comforting smells of pies baking and macaroni and cheese bubbling in the oven, my son-in-law made a surprising announcement: “I’ve done my research, and I’m ready to buy an electric car.” Then, excitedly, he declared, “Let’s go check out the new Ford Mach-E!”
What do you do when your son-in-law drops a bombshell like that on Christmas Eve? You grab your coat, leave the warmth of home, and head to the dealership. We drove out to San Bernardino, California, where the bright car lot lights illuminated the sleek Ford Mach-E. With its futuristic design and cutting-edge technology, the car was impressive—a testament to American innovation.
After a test drive and some negotiation, we sat down to crunch numbers. Walking into a dealership is like entering a battlefield—you have to be sharp and cautious. Car salespeople live by their commissions and are trained to close deals, but I was there to ensure my son-in-law made the best financial decision. With a newborn at home, this purchase wasn’t just about luxury; it was about what made the most sense for his family’s future.
The Big Question: Lease or Buy?
We reviewed two options: leasing or financing. With an MSRP of $55,000, a $10,000 down payment, and a stellar FICO score of 800, my son-in-law qualified for the best rates. Here’s how the numbers looked:
Leasing:
After a generous $11,000 manufacturer rebate, the lease payment was around $350/month for 36 months.
The residual value at the end of the lease was $24,500.
Total cost over three years, including the down payment: $41,700.
Financing:
At 5% APR for 60 months, the monthly payment would be approximately $849.21
Total cost over five years, including the down payment: $60,952.33
At the end of the loan, he would own the car outright, with a potential resale value of $20,075. The net cost would be approximately $40,000.
The Tax Considerations
If he started a home-based business, which he currently does not have, both leasing and purchasing would have tax benefits:
Leasing: He could deduct a percentage of lease payments based on business use, potentially saving thousands over three years.
Purchasing: Section 179 and bonus depreciation could allow him to deduct a significant portion of the purchase price in the first year. By the way, it’s very easy to start a home-based business and receive these tax benefits!
However, these benefits depend on the car being used primarily for business, and they don’t always outweigh the financial burden of taking on debt.
The Best Option: Neither
After analyzing the costs, tax benefits, and long-term implications, the best financial advice is clear: neither leasing nor financing is the ideal choice. Instead, he should pay cash for a reliable, late-model used car.
Here’s why:
Debt is the Enemy
Debt is more than a financial obligation; it’s a weight that slows you down. Life is unpredictable, and unexpected events like job loss or medical emergencies can make debt unbearable. Avoiding debt frees you to navigate life’s uncertainties without financial strain.
The Risk of Over-Leveraging
Even with excellent credit, no one is immune to hardship. Falling behind on car payments can lead to repossession and a damaged credit score. Is the risk of losing financial stability worth the thrill of driving a brand-new car?
The Freedom of Living Debt-Free
Owning a car outright eliminates the stress of monthly payments, freeing up income for savings, investments, or your family’s future. A debt-free life is a life of opportunity and peace.
The Practical Alternative
Instead of leasing or financing, I advised my son-in-law to:
Save an additional $2,000–$3,000 to add to his $10,000 down payment.
Purchase a reliable, late-model used car with a proven track record of longevity.
Have the car inspected by a trusted mechanic before buying.
Modern cars, especially well-maintained American-made vehicles, can last 300,000–400,000 miles, making them an excellent investment.
Debt-Free Is the Way to Be
Debt is a thief of opportunity. Financing cars, clothes, or even vacations is the opposite of financial freedom. As Proverbs 22:7 reminds us:
“The borrower is a slave to the lender.”
The goal is to live free of financial bondage, focusing instead on wealth-building and securing your future.
The Decision: He Leased the Car
Despite my advice, my son-in-law chose to lease the car. He felt confident in his financial stability, employment, great income, low debt-to-income ratio, solid savings, and excellent credit. He negotiated a fair deal and secured a favorable lease rate. These advantages come with financial discipline, and I respect his decision.
However, the core principle remains: Leasing or financing a car redirects money away from savings and investments, which could otherwise grow his wealth.
Final Thoughts: Lessons for the Future
If you haven’t read The Millionaire Next Door, I strongly recommend it. Wealthy people don’t finance cars—they buy used, pay cash, and let their money work for them.
Too often, what we perceive as wealth is actually financed extravagance: cars, clothes, and jewelry bought on credit. Don’t fall into that trap.
Start today. Build a debt-elimination plan. If you haven’t purchased a home yet, that’s one exception where debt may be necessary—but even then, it must be approached responsibly.
Consult a financial counselor or, better yet, talk to me. Because the best gift you can give yourself—and your family—is financial freedom.
Eric Lawrence Frazier MBA
President | CEO
The Power Is Now Media Inc.
800-401-8994 ext. 703
Direct: 714-475-8629
California Real Estate Broker
CA DRE: 01143484
Texana Bank Mortgage NMLS:
Mortgage Originator NMLS # 407536
NMLS: 461807
Appointment Calendars:
Homebuyer consultation: https://calendly.com/ericfrazier/homebuyerconsultation
Homeseller consultation: https://calendly.com/ericfrazier/realestateconsultation
Real Estate Agent Consultation: https://calendly.com/ericfrazier/agentorientation
About The Power Is Now Media: https://www.thepowerisnow.com/about