I always wondered if by leasing a car I would be better off than buying cars and having to pay off my car loans. I finally got the answer, without having to make complex calculations with Excel!

In the Wealth Manager, I put my age at 30 years old, and I simulate buying cars every 4 years until I am 65 years old as an example. Taking into account that I have a pension plan worth $100,000 today and that I save $800 a month, my retirement would look like given in Figure 1.

Buying a car

I now simulate the case where I buy a car for a price of $20,000 with a loan of $15,000 to be paid over 4 years with a 4% interest rate. I assume I will buy a new car every 4 years until I am 65, the details of the parameters are given in Figure 2.

The result is that at the age of 85, I have $680,000 as savings (Figure 3), enough for my retirement and some buffer in case inflation is more than expected, or if my returns are lower than expected (I might as well live longer).

Now, let's compare the simulation results with what happens if I lease a car instead.

Leasing a car

If I lease a car, I will still use the car icon, but the value of the car is now 0. Indeed, I do not own the car, as well as I do not have any liability attached to it. This means that the values in the parameter settings are set to 0 as shown in Figure 4. The annual expenses, on the other hand, are much higher as this is the annual lease price for the car. In this example it is set to $8,000 a year. You can fill in the lease price provided by your dealer and check the different scenarios.

The simulation now shows me that I only have $450,000 at the age of 85 (Figure 5), I lost 230,000 just by leasing a car instead of buying it! I guess the simulation is worth it, seeing what the different possibilities are and getting the best value out of your dealer.

Conclusion

Doing the maths in Excel to compare whether buying or leasing a car is giving you a better value can be troublesome. This example shows you that, usually leasing a car is more expensive (how do you think car lease companies make money), but you might want to see true impact on your lifestyle and get the best value out of it.