Does it make sense to trade in a car with no payments, in order to lease a brand new car that is valued at less than the trade-in value of the car that I own?
I own a car that is worth approximately $27,000. I don't have any more payments to make on it. Does it make more sense to keep the car for the next several years, or lease a brand new car whose lease value is around $25,000?
Long term the smartest financial decision is to own an car and drive it as long as possible. I'm car payment free- on a 5 year old car- hoping to drive it for at least another 5 years.
Leasing sometimes seems cheaper based on the payments- but your are always paying for the first few years of derpreciation. Car lose much larger amount of their value in the first few years.
So no- unless you really needed cash for some reason- I'm not seeing the benenfit of trading in your paid off car (or selling it) to go and get a lease. Even if the new car is cheaper.
What are you trying to accomplish here?
Do you like the car you currently have? If so, I’d recommend continuing to drive it. If the $25,000 car is more appealing to you, by all means, sell your car and purchase the brand new car. Keep in mind, though, that the brand new car will most likely depreciate much faster over the next couple of years than your current car.
The issue, in my mind, is not which car to own going forward. It’s the use of a lease, or really, any financing option on a car purchase. Surely that monthly payment could be going to more productive ventures, like paying off other debt, building an emergency fund, or increasing your retirement contributions.
If you do have other non-mortgage debts, you may want to consider selling your current car, buying something much less expensive (but still dependable, of course) and use the extra cash to pay down the debts.
I enjoy a nice car, too, but is it the best use of your equity? If it is, chose the car you’d like to drive long-term and don’t finance it!
Best of luck and feel free to reach out to me if you have any other questions!