Jean Chatzky sends strong message on buying vs. leasing a car

For millions of Americans, deciding whether to buy or lease a car is one of the most significant — and confusing — financial decisions they’ll make.

The car market is increasingly complex due to shifting interest rates, tariff concerns, and the rise of electric vehicles. It poses a tough question for consumers: “Should I buy this car outright, or would leasing be the smarter move?”

Former Today Show financial editor and bestselling author Jean Chatzky explores the question in an episode of her “Everyday with Jean Chatzky” podcast.

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At first glance, leasing seems attractive. Lower monthly payments, the ability to drive a new vehicle every few years, and minimal repair responsibilities are hard to ignore.

But those perks come with trade-offs — such as mileage limits, wear-and-tear fees, and the lack of vehicle ownership at the end of the term.

Meanwhile, buying — whether with cash or a loan — offers long-term (although quickly depreciating) equity, freedom from contracts, and the pride of full ownership, but often requires a larger financial commitment up front.

The decision about whether to buy or lease a car is about lifestyle, flexibility, driving habits, and future plans.

Do you rack up high mileage with a long commute? Are you planning to expand your family and need a reliable vehicle for the next decade? Are you more interested in enjoying the latest tech features and trading in every few years?

Chatzky discusses some of these issues with Edelman Financial Engines wealth planner Andy Smith.

A couple is seen at a car dealership selecting a vehicle. Former NBC Today Show financial editor and bestselling author Jean Chatzky discusses whether it's best for Americans to buy or lease a car.

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Jean Chatzky discusses leasing or buying a car

Chatzky explains her perspective and behavior that informs her decision making when it comes to buying or leasing a car.

“I've been a buyer for many years in part because I tend to drive my cars over the three years that you would have them on a lease, but I also was a commuter for many, many years and I knew that I would put more mileage on the car than the lease would allow,” she said on her podcast “Everyday Wealth with Jean Chatzky.”

“That's not true these days with so many people working from home,” she added.

In response, Smith clarified his view that people arrive at this decision from their own experiences.

More on retirement:

“It depends on your particular situation. In the past, the wear and tear, the use calculus was absolutely important,” he said. “Now, it's more how often do you want a new car.”

Smith also addressed the issue of taxes on cars.

“One other thing that I would say is how sales tax is calculated when you're leasing versus when you’re buying,” he said. “When you're leasing, remember, you're just paying for the amount of time that you're going to actually own and use the car. So, a lot of times the sales tax calculation is going to be a little bit less because you're not on the hook for the entire price.”

“When you purchase, the sales tax is going to be there,” he continued. “So, that's something else to keep in mind as you're going through these sorts of decisions.”

Chatzky cuts to the chase on the question of leasing vs. buying a car

Chatzky asked Smith directly about his view generally on whether to buy or lease a car.

“The good adviser in me would say it depends,” Smith said, before offering more specific advice. “But, a lot of times I'm going to advise people it's often better to lease a car than to buy, if a couple of things: If you like a new car every couple of years, if you drive less than 15,000 miles, if you're not just going to beat the absolute tar out of the car over that period of time.”

Smith suggested that when people look at leasing, there are a couple of things he wants them to keep in mind.

“Don't choose any additional options with a leased car because the dealer's going to charge you for them and you're not going to get your options back when you turn it in,” he said. “Make sure that you get gap insurance. This protects the person leasing the car from having to pay the difference between the residual value and the market value at the end of the lease.”

He also said people looking at leasing a car ought to avoid the cap cost reduction and avoid putting a larger deposit down to reduce their monthly payments.

“That's where people get tripped up a lot of times,” Smith said. “They think, ‘I want to pay 700 bucks a month' and then they kind of back in to the calculation from there. So that's something to keep in mind. The big thing to do is not lease beyond the car's warranty.”

“On the overall decision, you just have to understand yourself.”