Lease or Buy: You Decide

Drew Thomas  0:00  
All right, so, so, so, here's the thing. We're, this, welcome to, to the latest episode of Bank Chats on video, right? A first, yeah, yeah, yeah. This is, this is actually kind of cool. We're trying to, we're trying this out, yeah, yeah, well, yeah, this is our first, this our first go at this. Yeah, right. And so, we're gonna, we're gonna give video a shot, because we've noticed that a lot of people are watching us on YouTube, or, well, up until now, listening to us on YouTube. Yeah right. And so, we're gonna try to give the viewers what they demand now, once they see the two of us, they may not demand it again. 

Jeff Matevish  1:06  
Right, they're gonna go back to Apple Podcasts, yeah.

Drew Thomas  1:08  
Yeah. Because, you know, I mean, you're an attractive fellow, I'm not so much.

Jeff Matevish  1:13  
Oh no, no, no, no.

Drew Thomas  1:16  
We're gonna give this a go. So, so, so what are we talking about today?

Jeff Matevish  1:21  
So, we were in a, we took a road trip a week ago, and we tend to talk about cars while we're in a car for whatever reason. So, we thought maybe talking about buying cars versus leasing cars. I'm always in the market for a new car, but I've never, you know, I haven't pulled that trigger for a long time. Yeah, and I've never leased a car, so I know nothing about leasing cars.

Drew Thomas  1:45  
I have honestly never leased a car either. I've only bought cars. But in the interest of this conversation, yeah, yeah, right, we decided we're each gonna take a position, right, right? And we sort of flipped a coin. And you got...

Jeff Matevish  2:01  
I got buying car, yeah.

Drew Thomas  2:02  
Yeah. And, and I got leasing a car. So, we'll see how it goes, yeah.

Jeff Matevish  2:06  
So, I learned a lot about leasing cars just doing research too, so.

Drew Thomas  2:10  
Yeah, so, but to your point, I've never leased a car. So, so everything that I'm saying is purely based on what I've read. Okay, it has no basis in real-world, real-world experience. Okay, so, so what did you find?  So, let's talk about buying a car. Because I think that's, I would argue that's probably the more common thing for people to do.

Jeff Matevish  2:32  
You hear more about buying a car, yeah.

Drew Thomas  2:34  
Yeah, so when you buy a car, I mean, I think most of us know the general. Now, have you ever, do you buy new cars or do you buy used cars?

Jeff Matevish  2:40  
I've only bought used cars, yeah, and I'm young, so I haven't bought very many of those used cars yet. But, yeah, we were always a used car family. I think my dad, his most recent cars is a new car, but it was one of those, like, you know, end of the year stock. Yeah, they're trying to liquidate and, but he's held on to it for, he just hit 300,000 miles on it a couple months ago.

Drew Thomas  3:07  
Wow, that's impressive.

Jeff Matevish  3:08  
He was, he was a salesman, so he did a lot of traveling back before he retired, yeah, yeah.

Drew Thomas  3:13  
Yeah, yeah, that, that's impressive. 300,000 miles on a car that's not a corporate car.

Jeff Matevish  3:17  
Right, right. Something, no, not a fleet car or anything. Yeah.

Drew Thomas  3:22  
Now, does your dad drive, or did your dad drive for his business?

Jeff Matevish  3:25  
Oh yeah, he, handled all of you know, Western Pennsylvania, Central Western Pennsylvania was his territory. So, he, yeah, he traveled a lot.

Drew Thomas  3:31  
So, it was kind of a business thing. Yeah, exactly. It wasn't like it was a rental car, or, anything like that.

Jeff Matevish  3:38  
Right, right. But he took care of it.

Drew Thomas  3:41  
Yeah, that's, that's pretty impressive. I've, I've only bought used cars myself. And my wife is a different story. She always, she was always a new car girl, okay. And, you know, some of the arguments that she made for always buying new, are some of the arguments that people make for leasing, yeah, sure, yeah. And, but I was, I grew up, I'm the son of a mechanic, my dad's been in business forever. So, we, we always just, you know, bought used and fixed, yeah, whereas you could, we had to fix, yeah. So, so what car do you have now?

Jeff Matevish  4:13  
Oh, I have, so my last car, a couple year ago, blew an engine. So, I'm, oh, okay, I'm running a, I'd love to have an SUV, right? I just have a little, little sedan right now, but.

Drew Thomas  4:23  
Yeah, when I, when I had a, when I started working for the bank, I had a, I had a pickup truck.

Jeff Matevish  4:31  
Okay, I'd love to have pickup truck.

Drew Thomas  4:32  
Yeah, it was great. And then part of my job at the time was going out to every branch, and it was costing me a fortune. I mean, I mean, granted, I got paid mileage. And yeah, but yeah, it was still costing a fortune in gas and things like that, and tires, brakes and all that kind stuff. And so I ended up buying a sedan. And then we recently upgraded to you, because I, we wore it out. Yeah, we were, we had the sedan. We wore it out. And so now we have an SUV, and I do like it, yeah, yeah. The older I get, the more I like getting into things that don't require me to get down low.

Jeff Matevish  5:04  
I know I miss getting, getting in a car up high. Yeah, I took my parents for, we went somewhere over the weekend, and the moans and groans out of them trying to get in and out of a little sedan at 70 years old. Yeah.

Drew Thomas  5:19  
Now, now, look, now, when you bought, do you usually go through the dealer, or is it something where you go to the bank? There's two different options, I mean, right, right, and it depends on where you get your, your loan from.

Jeff Matevish  5:29  
Yeah, right, and in the past, I've gotten my loans from banks. I've never gotten a loan from a dealership. Banks were, you know, back then, tended to, you know, give a little better deal, yeah, than the dealership, but.

Drew Thomas  5:42  
So, what are some of the advantages you found for buying? Like, either in your personal experience or within your research.

Jeff Matevish  5:49  
Yeah, so one big perk is, if you are buying and you're buying used, you may not even have to take out a loan, whereas with a lease, you have a payment that, you have a guaranteed payment every month, yeah, yeah. So, that's a huge one.

Drew Thomas  6:07  
So, you're, so you're building, you're arguing you're building equity, is what you're saying, right? Because eventually you could pay it off.

Jeff Matevish  6:12  
Right, you could build equity.

Drew Thomas  6:13  
Or, yeah, or the very least, you're paying it off.

Jeff Matevish  6:15  
You're paying it off, yes, yes. And you own something, then, yeah.

Drew Thomas  6:18  
Yeah. But what, but the thing about cars, and this is what I was thinking, this is, this is one of the biggest arguments I think, that people have for leasing cars. Yeah, is that your, cars so rarely build value. Yeah, it's not much like real estate or when you invest in, I mean, everything can lose value. Don't get me wrong. You can buy a house and lose value on Sure, sure. But traditionally speaking, you're, you're gonna likely get at least as much out of your house as long as you maintain it, take care of it, your neighborhood doesn't go south. Yeah, you're probably gonna get at least as much out of as what you paid. Whereas most of the time with a car, you're not.

Jeff Matevish  6:56  
Yeah, as soon as you drive off the lot, yeah, which I don't understand why. So, cars deprecate in value or depreciate in value the most the first couple of years. And I don't, you'd think that they depreciate faster the older they got, because things start going wrong with them. But.

Drew Thomas  7:11  
Yeah, you would think, I mean.

Jeff Matevish  7:13  
And that was, that was one of the negatives I found for leasing a car, you're paying during the, the, the time when that car is depreciating in value the fastest, yeah, so you're paying the most, yeah, yeah.

Drew Thomas  7:24  
Yeah. That's, that's true. I some of the, the arguments that I found for, for to solve that problem, okay, yeah, is when you're leasing a car, you're getting, you're getting the best safety features, the most current safety features. Yeah, you're getting the most current technology. So, you know, a lot of cars these days, they're not like they used to be back in the 70s, 80s, whatever. I mean your car. I mean, during COVID, there came a point where people weren't buying cars because they couldn't get computer chips right, not because they couldn't get an alternator. Right, right. They couldn't get computer chips to do all this stuff that they have in the dashboards now, with different car plays and GPS units and all that kind of stuff, right. So, you, so you're getting the latest technology if you're leasing, and usually your lease is like, three years, yeah. So, you're, you're likely getting, you're always going to have the latest technology, but you're always going to have a payment, right. Because you're always, so you take it back to the dealer on month 36 you say, here you go, yeah, and you hand it back to them. You don't have to worry about how much your car is depreciated in value, because the dealer is going to take it back.

Jeff Matevish  8:32  
That was already, already predetermined, what you were going to pay based on that depreciate at the end of that term. Yeah.

Drew Thomas  8:37  
Yeah. So, so you don't have to worry about that, and theoretically, you're going to get another, newer car with the newest safety features and all that kind of stuff, right, right? So, I guess that's, that's where they're making their money, is they're making their money on that, you know? And then, yeah, and then they can turn around and sell that car as a used car.

Jeff Matevish  8:53  
Yeah, which, I mean, I've looked at, at, like, fleet cars or, you know, lease cars like that for because, you know, they're taken care of, because they have requirements for mileages or mileage and, yeah, getting them serviced and stuff like that. You have to use factory parts. You can't just put on anything from, you know, an aftermarket fix for a leased car, yeah, yeah.

Drew Thomas  9:15  
And, but that is something so when you're when you're trying to calculate. So, here's what I did. I went and I grabbed two. I wouldn't look to see what the two most commonly purchased vehicles were in the United States in 2024. Okay, okay. One was an SUV, okay, right. And we're not endorsing anything. I'm just telling you what they were, yeah, right. The most commonly purchased SUV in the in the United States in 2024 was a Toyota RAV4.

Jeff Matevish  9:14  
Really?

Drew Thomas  9:37  
Yeah. Okay. I was surprised, yeah. The most common vehicle overall sold in the United States was the Ford F-150. The Ford F-series is, I mean, they say that all the time on the commercial, yeah, the most commonly sold, yeah. But they're actually the most commonly sold vehicle in the US, but like several 100,000 units.

Jeff Matevish  9:57  
Oh, I would have never guessed that. No.

Drew Thomas  9:59  
Yeah, so I, so I just, what I did was I went to the, I just went to the manufacturer's website. Okay, now, just like anything else, where you were, where you live in the country, sometimes where you live in your state, is going to determine pricing, right? So, this is, this is general pricing. You're most likely not going to get this particular deal if you went out and bought a Toyota RAV4 or an F150, because your dealership, your mileage may vary.

Jeff Matevish  10:29  
Okay, yeah, yeah, that took me a second, but yeah.

Drew Thomas  10:36  
So, the, on the dealership website was a deal for the Ford F-150, 60 months. Okay, so five years, yeah, at 3.9% interest and $2,000 down, assuming you put $2,000 down on the, on the cost, was $900 a month for a Ford F-150, wow, yeah. Which is, yeah. Now, there are different trim models and packages and things like that, yeah, but to lease it for 36 months, of course, there's no interest, because it's built into the lease price, right? You had to put almost three times as much down. So, it's $5,700 down really, yeah, but it's only $290 a month.

Jeff Matevish  11:20  
See, I thought leases, the down payment was far less, and that's why people were normally, when you get a lease to get a little higher end vehicle than you, you normally would if you were buying car, you know. I guess not.

Drew Thomas  11:33  
Yeah. Now, see, I don't know if the, if the down payment could be a trade-in, like, I don't know, okay, like it could be a trade-in or something like that, yeah, $5,700 down, but you're, you're, you're at two thirds the monthly cost. Yeah, right, $900 a month versus $290 a month is a huge swing. Oh, yeah, in terms of your cost. Now, you made a point, which I did not, which I did not, look up, mileage. So, I know on leases you have to do, you have to stay within a mileage window.

Jeff Matevish  12:07  
It's usually about 15,000 miles, 12,000 to 15,000 miles, and then if you go over that, it's 10 to 25 cents per mile over. Per mile, usually okay, that can, that can get, you know, pretty pricey if you are a traveler.

Drew Thomas  12:22  
So, do they, do they just tack that on at the like, do they look at your mileage when you go to turn the car in and be like, whoa, you went 5,000 miles over. You're gonna spend...

Jeff Matevish  12:29  
I would assume, or, or I don't know, because you know, if you take out a lease for three years, then, I mean, are you, are you turning your numbers in every year? Or is it just like you said, and at the end of the lease, in general, I don't know the, I don't know either.

Drew Thomas  12:44  
But that is something that you'd want to talk to, yeah, when you're, when you're figuring out, I think the point, the reason we're having this conversation on Bank Chats is because we're trying to to educate people on this idea of what's the most financially advantageous for you. Yeah, right. And so I guess it really depends on how much money you have available to you for down payments. Because even when you're buying a car, it could be a down payment. Oh, yeah, right, yeah. It could be a trade in something like that. And then, but leasing a car, typically, you can get more car for less money because you're only leasing it for the first, say, three years of its life. Yeah. But at the end of it all, you don't have anything to show for it, right?

Jeff Matevish  13:26  
And if you're, if you're like me and my family, you know, you run the car until it doesn't run anymore, you know? Yeah. So, you're saving money by keeping that car for years and years and years. Yeah.

Drew Thomas  13:35  
Now, some people would argue that the cost of maintenance is higher when you buy, because the longer you own the car, the more maintenance it needs.

Jeff Matevish  13:43  
Yeah, you got to find that balance, you know, when it starts nickel and diming you, you know is, is that couple $1,000 a year in maintenance worth, you know, keeping or do I start looking for a new vehicle?

Drew Thomas  13:54  
Yeah. And you can make the same argument about buying a new vehicle. I mean, I said my dad's been a mechanic for many years, yeah. And there are times when people will say, well, you know, I don't want to put $800 into this car. Wow, 20, you know, say it's, say it's a 15-year-old car. I don't want to put $1,000 into it. Okay, but that $1,000, it depends on what that $1,000 is, yeah, and how much the car is probably worth, as you know, in its current state, right? Because you can spend $1,000 on tires these days. And no matter what car you own, you're gonna have to buy tires. Yeah, right.

Jeff Matevish  14:26  
And we always say you can't buy a car for $1,000 so is it worth putting $1,000 in? A lot of times, yeah.

Drew Thomas  14:31  
Yeah, yeah. Sometimes it is. And some people, and some people will say, well, you know, if I go out and lease a new car, like I could lease a new Ford F-150 for $250 or $200, what is it, $300 a month. Yeah, but that's per month. So, in months one, two and three, you're ahead of the game by month four, right? You can't even make it out of a season of the year, right? If you, if you release that car on day one of winter, by spring, you, you're now losing money.

Jeff Matevish  15:01  
Yeah, but your warranty on that car is usually, you know, two or three years, so it's covered, usually, you know, the entirety of your lease too. So, you're not paying a lot for, necessarily, for fixes and stuff like that.

Drew Thomas  15:13  
No, no, but, but you're still making a car payment. Oh, yeah, yeah. So, so assuming, I'm sorry, I should have, I should have clarified. So, assuming that you, your argument was that when you pay it off, it's yours, okay, you don't have a car payment, right, right? Putting $1,000 into a car you own versus taking on a car payment, oh, yeah, right, that car payment, like by month four, you're paying out more than what you would have paid if you to just fix the car you already, you already owned, right? Right, right, right. So, so let me, so I did mention the other one, so let me, let me mention this other vehicle. So, the, the Toyota RAV4 which was, it's less expensive of a vehicle, okay, first of all, yeah, they're, they're on their website, they said, buy 60 months, I tried to keep things the same. So, five-year payment to buy it at 4.99% interest, with an estimated $2,000 down was $535 a month. So, significantly less, because the vehicle is less expensive. A least for 36 months on that car with about $4,000 down was $340 a month. So, ironically, even though the car's less expensive, it's a higher lease price than the more expensive Ford, which may play into what you were saying about the depreciation of the vehicle, right? The Ford has a higher ceiling to start with, and then.

Jeff Matevish  15:16  
So, you want, you want to lease a vehicle that doesn't depreciate much by the time that, that lease term has ended.

Drew Thomas  16:42  
I guess, yeah, yeah. So, yeah, so, so, so, I guess you're driving the car through, like you said, its most trouble-free years of your leasing, but you're also driving your car that you're buying for the first five or six years trouble-free. Yeah, the lease may even include for your oil changes and other scheduled maintenance, but I don't think you can bank on that. No pun intended.

Jeff Matevish  17:09  
And so, I mean, you buy a new car, you know, sometimes that's, that's included too, you know, dealership wants to make that, that, that sale, you know.

Drew Thomas  17:15  
Yeah, especially if it's under warranty, I guess, yeah. You can drive higher price, better equipped vehicle than you might otherwise be able to afford. We kind of, we kind of covered that already. Active safety features.

Jeff Matevish  17:16  
Insurance. I found insurance on, on leased vehicles can, tends to be higher, because the, the dealership owns that, that vehicle, so they have requirements for insurance. So, usually you pay a little bit higher premium for a leased vehicle.

Drew Thomas  17:43  
So, is that because, well, so I guess that depends on your state, right? Because, because some states require, does every state require auto insurance now?

Jeff Matevish  17:52  
I don't know, probably a minimum, yeah.

Drew Thomas  17:54  
I would have to think that every state, although not every state, requires state inspections or anything, either, so. But I you're probably right, because they probably require you to have comprehensive insurance plus liability plus accidents.

Jeff Matevish  18:08  
Because they own it. I mean, and they want it back in the same condition that it left in.

Drew Thomas  18:13  
Yeah, and if, and if they own it, they probably don't want to be paying for property damage or medical bills if, you know, if you accidentally get into a bad accident in somebody.

Jeff Matevish  18:23  
And that was the other thing. Leased cars you got to return in the same condition that, it's like a rental, I mean, so if you get into a fender bender in a car you own, you can decide whether you're going to fix it or not, where, yeah, a lease you have to or you're going to pay the penalty.

Drew Thomas  18:38  
Yeah, I think there's, I don't know. I think maybe that's, maybe you're, you're, the way you phrase it is the best way to look at it. When you're leasing, you're really renting.

Jeff Matevish  18:47  
You are. Yeah, it's a long-term rental, yeah.

Drew Thomas  18:49  
And so just like if you rent an apartment, your landlord's going to want the apartment to be kept in good condition and be able to re-rent it afterward. Not that the dealership is probably going to re-rent your car, but they probably want to sell it. Yeah, they're not just gonna scrap it after three years and right and right, you only making partial payment. I did see this. It says here that there could be significant tax advantages for business owners if they lease.

Jeff Matevish  19:14  
I did see that, yeah, I didn't read too far into it.

Drew Thomas  19:17  
So, and I didn't read too far into it either, because I didn't want to start offering tax advice. If it's just something that, if you have a tax professional or an accountant or something, you may want to discuss that with them that is leasing your business vehicle or a vehicle that you use partially, like your dad for business, yeah, would it be a tax advantage to lease versus buy? Yeah? Yeah.

Jeff Matevish  19:40  
And along those lines, and I don't have this written down or anything, there was two types of loans or leases. There's, like, an open loan or an open lease and a closed lease, where, like the close lease, you have to purchase the vehicle after the term has completed, okay? And I guess that's, that's more common for commercial vehicles. I don't know there's an advantage to that or not, but just, I know there are two, two lease methods, I guess.

Drew Thomas  20:09  
Yeah, I don't know. I guess may, in a way, that might be kind of like a, I don't want to say, like a balloon payment on a mortgage or something, where you, you pay less upfront for the lease to, on the vehicle, and then at the end of the lease, whatever the vehicle then is determined to be worth you pay, yeah, business side, and then that maybe that's where your tax advantages, a tax write off or something. I don't know could be. So, I don't know. I still, I still kind of come down on the idea of buying. I mean, even though I was, I was pro-lease in this conversation, yeah, just because I don't like the idea of not owning my own stuff.

Jeff Matevish  20:49  
I'm the exact same way. Yeah, yeah. I don't even like taking loans out for car if I don't have to, but, you know, at least it's going to be mine, you know.

Drew Thomas  20:56  
Yeah, and because I do tend to want to fix things rather than just trade it in, and yeah and stuff, I mean, and I don't always care about whether or not I have the latest gizmo in the car. Yeah. I mean, every car today comes with a compass, but how often do you use it? True. It used to be a thing. I remember it used to be, people used to buy those little sticky, oh yeah, stick it on their dashboard, just so they knew which direction they were going, like it mattered. Yeah, right, but yeah, it's just one of those things.

Jeff Matevish  21:24  
Yeah, I guess it depends on, you know, it's a personal preference. You know, do you want the latest and greatest, or do you worry, do you drive a lot of miles? Or, you know, do you have kids that may be a little bit messy? That's a good point. Maybe a reason to buy versus, you know, leasing a car, but.

Drew Thomas  21:24  
Yeah, and, you know, you can easily, speaking of kids, you could even consider the fact, if you have a, say, a 13-year-old at home, right? Four years, three years, maybe they might want a car, you know. So, if you buy, yeah, yeah, maybe hand it down, and you get a new car yeah, but maybe you want to pass that down to them, or something like that gives them an opportunity to start with something where they don't have a payment of some sort if they want a car. Yeah, yeah. I mean, there's all kinds of things to consider.

Jeff Matevish  22:12  
Oh, yeah, and don't, you know, a lease you don't have to worry about selling a car at the end, or, you know, if you don't want to trade in a car and you kind of just give it back. And don't worry about, so, yeah, there's, there's benefits to both, but.

Drew Thomas  22:22  
Yeah, but from a financial perspective, I think this, this conversation really ends up being what's most advantageous for you, yeah, specifically, yeah, because everybody's a little bit different, you know. And if it's really important to you to have, you know, the nicest car on the block and the most recent, whatever it is, you know, the nicest wheels, the, the most recent GPS system, whatever it might be, yeah, then there's nothing, there's nothing saying that that's a bad thing. It's just that in that case, you may want to lease. If it's more important for you to have something long term that maybe eventually you don't have to pay for every month, you know, then maybe it's more important to buy. Yeah, or more advantageous to buy. Yeah, right, right. So, all right, all right.

Jeff Matevish  22:22  
I'm going to keep shopping for cars. I'm not going to buy one, but I'm going to keep shopping for cars.

Drew Thomas  23:14  
You know, we, it was, we were actually considering buying new, yeah, whenever we, whenever I was getting rid of the sedan that we had, and I'll tell you, at the time we were looking, it was, inventory was terrible. Yeah, you couldn't get anything. And the car prices were just insane. Now you're starting to see a lot of these things on TV where they're starting to offer these low interest, like for qualified buyers, right, whatever you know. In other words, if you have a credit score of 750, or higher, probably, yeah, you can get 0% or whatever. And that's the other thing. Look at interest. I mean, just like with your, when you're buying a house, or just when you're, when you're buying anything else on a loan or a credit card, whatever, consider your interest rate. If you even get a 0% for 60 months on a car, it's like you're, you're not paying any interest whatsoever. That could considerably impact what your actual monthly payment is. Versus if you're paying even 5%. Definitely, yeah, you know. All right, so you're still going to buy, I'm still going to buy. We haven't convinced each other of anything. No, is what you're saying. You're right, it's a draw all right. Let us know in the comments what you guys think you know, do you buy, or do you lease? Yeah, you know. Let us know in the comments. Drop us a, drop us a note, either at ameriserv.com/bankchats. There's a form there you can use to communicate with us. You can, you can, there's even a link, I think, in the description, where you can text, yeah. We make it real easy for you, yeah. So, let us know what you think, buy or lease, and you know, maybe we'll talk about it on a future episode. Maybe you, maybe you, I'm, hang on, I'm looking at the camera. Now that we have them, maybe you have an idea. Let us know.

Jeff Matevish  25:05  
Sounds good, Drew. All right, thanks.

Drew Thomas  25:15  
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Drew Thomas  26:22  
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