Is Leasing a Car a Smart Move If My Employer Covers the Taxes?

Summary

---

Episode Overview

Title: Is Leasing a Car a Smart Move If My Employer Covers the Taxes?
Podcast: Ramsey Everyday Millionaires (Ramsey Network)
Date: September 19, 2025
Hosts: Dave Ramsey (main speaker)
Main Theme:
This episode addresses the increasingly common question: Should you lease a car if your employer offers a pre-tax benefit that covers the taxes? Dave Ramsey dives into the math behind leasing, tax benefits, and why “financially sophisticated” decisions often lead to poor outcomes. The episode uses candid language and relatable analogies to warn against common money misconceptions, with a focus on doing what’s mathematically sound over chasing tax breaks.

---

Key Discussion Points & Insights

Rosie's Question: Employer-Subsidized Car Lease

• [00:16] Rosie from New York calls in asking if an employer's pre-tax benefit for leasing affects the financial advice comparing leasing, financing, and buying a car outright.

Dave's Core Financial Principles & Analysis

• Leasing Is Financing – And Always a Bad Deal

  • Dave stresses that leasing a car is just another form of financing and is “the most expensive way to operate a vehicle.”
  • [00:41] Dave Ramsey: “No, don't do that. No, no, no, no, no. I'll take the money. Just give me the money and I'll go buy a car.”
  • [00:55] Even considering the pre-tax benefit, leasing is not financially wise.
  • The average cost of capital in a car lease is cited at 14.2%—very high.

• Tax Breaks Don't Justify Bad Decisions

  • Tax advantages from leasing are minimal (“trading dollars for quarters”) and don’t make up for leasing’s high costs.
  • [02:02] Dave Ramsey: “You're trading a dollar for 30 cents—bad trade… in the process, in the name of sophistication or in the name of tax breaks… you're doing a really dumb butt deal economically and mathematically just to get involved in the tax thing.”

The Tax Break Fallacy – Vivid Analogies

• Don’t Do Something Only for the Tax Break

  • Dave urges listeners not to make otherwise bad financial moves just to get a tax break.
  • Example: Solar Panels
    • Some people are financing overpriced solar panels just to claim expiring tax credits, even though it makes no financial sense to pay high interest just for a temporary tax benefit.
    • [02:15] Dave Ramsey: “People are going, oh God, I can't miss the tax break. And they're spending more than the tax break because they can't afford to finance it… It's the same thing. We're motivated by the wrong thing when you're motivated by taxes.”

• Mortgage Interest Myth

  • Dave explains that most Americans don’t even get the mortgage interest deduction because only 8% itemize deductions, yet many believe keeping a mortgage is saving them money.
  • [03:09] Dave Ramsey: “A whole bunch of that 92 that aren't actually taking the write-off go, 'Well, I'm keeping my mortgage because it's saving me all my...' No, it's not. You're not itemizing. That's just stupid.”

• The Dollar-for-30-Cents Trade

  • Even for those who do itemize, the trade-off is sending the mortgage company $10,000 in interest to avoid paying $3,000 in taxes—a bad deal.
  • [04:01] Dave Ramsey: “I'm going to send the mortgage company $10,000 to keep from sending the government $3,000. And I'm going to strut around like I'm smart when I traded a dollar for 30 cents. No, you're stupid. That's it.”

---

Notable Quotes & Memorable Moments

• On Leasing vs. Buying:
  • “Leasing a vehicle is financing a vehicle. You're signing the lease, right? …No, don't do that…” – Dave Ramsey [00:35]
• On the True Value of Tax Breaks:
  • “When you have a $1,000 tax write-off… you don't save $1,000, you save a quart. You save $250 in taxes.” – Dave Ramsey [01:51]
• On Chasing Tax Breaks:
  • “100% of the time that you do something only because of the tax, it's a bad deal. You do the smart things and get whatever tax break you can get on the smart things and you move on.” – Dave Ramsey [02:13]
• On the Mortgage Interest Deduction Myth:
  • “A whole bunch of that 92% [who don't itemize]… go, 'Well, I'm keeping my mortgage because it's saving me all my…' No, it's not. You're not itemizing. That's just stupid.” – Dave Ramsey [03:09]
• On Trading Dollars for Quarters:
  • “I'm going to send the mortgage company $10,000 to keep from sending the government $3,000. And I'm going to strut around like I'm smart when I traded a dollar for 30 cents. No, you're stupid. That's it.” – Dave Ramsey [04:01]

---

Important Segments & Timestamps

• [00:16] Rosie's question about employer-covered car lease
• [00:41 - 00:55] Dave cuts to the core: Leasing is always a bad deal, even pre-tax
• [01:49 - 02:13] Dave explains why tax breaks don’t justify poor financial decisions
• [02:13 - 02:40] Solar tax credit analogy and the “tax-motivation trap”
• [03:09 - 03:37] Mortgage deduction myth and the reality about itemizing
• [04:01] Dollar for 30 cents analogy—final blunt warning

---

Conclusion

The episode delivers a clear (and characteristically blunt) warning:
Don’t let the lure of employer perks or tax breaks push you into making financially unsound decisions. Stick to the fundamentals—pay cash, never lease, don’t chase tax breaks—and understand that perceived tax advantages rarely compensate for bad math. As Dave puts it, trading a dollar for thirty cents is “not sophisticated. It’s stupid.”

If you’re tempted by a fancy-sounding pre-tax benefit, this episode gives you the hard math and plain talk to stay strong and make a wise financial choice.

Transcript

[A]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Rosie's in New York. Hey, Rosie, what's up?

[B]

Hi. Thank you for taking my call.

[A]

Sure. How can I help?

[B]

My employer is offering a pre tax benefit for leasing a vehicle. So would this affect the financial advice comparison between leasing financing and buying a vehicle outright?

[A]

No. Leasing a vehicle is financing a vehicle. You're signing the lease, right?

[B]

Yes.

[A]

No, don't do that. No, no, no, no, no. I'll take the money. Just give me the money and I'll go buy a car.

[B]

Even though the lease would be pre tax and if I buy the car, it will be post tax.

[A]

The deal is this. Leasing is the most expensive way to operate a vehicle. Mathematically, it's a rip off. The average cost of capital quote interest rate is 14.2% and you're buying a new car and it goes down in value like a rock. And all of the lost depreciation is built into the lease payment. You're financing something you cannot afford to buy and you're calling it smart because of some little quantities. Quasi tax break. No, do not do this. It's a bad deal for you, honey. It's a bad deal. Everybody's trying to be sophisticated here and you're going to step in a bear trap with it. Don't do it. Simply pay cash for your car and if they want to give you some more money at work, I'll take it. There's no hundred percent tax break. Okay, so the only way this works is if you get 100% write off. Otherwise you're trading dollars for quarters. Understand how that works?

[B]

No. What do you mean by there's no.

[A]

When you have $1,000 tax write off or you do something pre tax $1,000, you don't save $1,000, you save a quart. You save $250 in taxes.

[B]

Yeah. You save like 30%.

[A]

Yeah, yeah. And so you're trading a dollar for 30 cents bad trade for the extra you're paying on the lease is what you're saying. Yeah. In the process, in the name of sophistication or in the name of tax breaks or sophisticated tax breaks, if we want to put the two words together, you're doing a really dumb butt deal economically and mathematically just to get involved in the tax thing. And you know 100% of the time that you do something only because of the tax, it's a bad deal. You do the smart things and get Whatever tax break you can get on the smart things and you move on. That's the only thing you do. And so I'll give you an example of that out there that's floating around right now into the big beautiful bill or whatever the flip they called it. They did away with the tax credits, not deductions for the solar units on your home. Oh, yeah, at the end of the year. So a bunch of people are running out right now and financing solar units at 18% so they don't miss the tax break. Stupid. Mathematically stupid. But it created this false scenario because the end of the year, it's over. Now solar actually has to mathematically stand on its own without a false tax prop up. And so solar's actually got to cost less than real electricity or the regular electricity. You know, it actually has to work now mathematically without a false government prop up. And. But people are going, oh God, I can't miss the tax break. And they're spending more than the tax break because they can't afford to finance it. And they're buying solar panels like they're, like they're going out load. Jeez. It's the same thing. We're motivated by the wrong thing when you're motivated by taxes. Same with people keeping their mortgage sometimes. Yeah, it's a tax. Great example, great example. 92% of the people this year in America will not take an itemized deduction. They will do standard deductions. If you do not itemize on your tax return, you do not get the write off on your home. The only way you get to write the mortgage off the mortgage interest rate on your home is you have to itemize. Only 8% of Americans do that. But a whole bunch of that 92 that aren't actually taking the write off go, well, I'm keeping my mortgage because it's saving me all my. No, it's not. You're not itemizing. That's just stupid. God, man. But it's just, you know what? That, that's Internet theology is what it is. It's a problem. And people just. You're exactly right. So if you did actually do it, let's say you had a thousand, $10,000 in interest and you're at the highest possible tax bracket, 37%. Okay. And you wrote off 30. So 300 or 3,000 bucks in tax, in actual tax savings will come from you having a $10,000 interest bill. So what people are saying then is these are the ones that actually do itemize is I'm going to send the mortgage company 10,000 to keep from sending the government 3,000. No, I need to say that again. I'm going to send the government 10. I'm going to send the mortgage company $10,000 to keep from sending the government 3,000. And I'm going to strut around like I'm smart when I traded a dollar for 30 cents. No, you're stupid. That's it.