Rich Habits Podcast

Episode 146: Lease or Buy? The Real Math Behind Your Next Car
Hosts: Austin Hankwitz & Robert Croak
Release Date: December 1, 2025

Episode Overview

This episode dives deep into one of the most common personal finance dilemmas: Should you lease or buy your next car? Hosts Austin Hankwitz and Robert Croak break down the real numbers behind both options while exposing hidden costs, sharing their personal experiences, and offering a practical, math-driven blueprint to help listeners make the smartest possible decision for their own financial situation. Whether you’re looking for your next ride, trying to avoid expensive traps at the dealership, or aiming to maximize your wealth-building, this episode delivers the clarity you need.

Key Discussion Points & Insights

1. Setting the Table: What Does Leasing vs. Buying Really Mean?

[03:00]

• Buying:

  • Pay cash or, more commonly, finance with a loan.
  • Monthly payments go toward ownership; after payoff, you own the vehicle and its title free and clear.
  • Freedom to keep, sell, or trade the car at any time.

• Leasing:

  • Essentially a long-term rental (usually 2–3 years).
  • Payments cover depreciation, interest, and fees—not the full value.
  • No ownership or equity at lease end.
  • Must return the car, often with extra costs.

Quote:

“When you lease a car, you're essentially renting it for a set period of time … at the end of the lease, you return the car back to the dealership. You don't own anything … you've been making payments for three years now, and you have nothing to show for it.” — Austin [03:55]

2. Why People Find Leasing Attractive

[04:00-05:38]

• Lower Monthly Payments: Lease payments are typically lower since you’re only covering depreciation (e.g., $450/month vs. $696/month if buying).
• Always Driving New Cars: Return every few years for the latest models, under full warranty, minimal maintenance headaches.

Caution:
Over the long term, leasing nearly always costs more than buying. Few actually do the math to see this for themselves.

3. When Leasing Makes Sense (The Edge Cases)

[04:52-06:45]

• Business Owners: Can deduct lease payments as an expense if used for business; this changes the math due to tax write-offs.
• Preference for New Cars: If you value always having new tech/safety and understand you're paying for this luxury.
• Low Mileage Drivers: Leases come with mileage caps (typically 10,000–15,000 miles/year); overages can cost $0.25–$0.30 per mile.
• Maintenance Haters: With most major repairs covered by warranty, leasing can minimize surprise costs.

Robert’s Perspective:

“I am a business owner and I don't like friction. So I've been trading out of leases for decades because I like the convenience of having a new car under warranty … But it's important to understand all the numbers so you see where you fit in.” — Robert [05:38]

4. The Real Math Breakdown (Lease vs. Buy)

[06:45-11:30]

• Scenario: $40,000 car (e.g., Toyota RAV4)

Leasing:

• $450/month for 3 years
• Total over 6 years (back-to-back leases): $32,400
• Total over 10 years: $54,000 spent, no asset owned

Buying (w/ 10% down, 5-year loan at ~7%):

• $4,000 down, finance $36,000
• $696/month for 5 years; then no payments
• Ten-year cost: ~$45,760 (payments + interest + down payment)
• Still own a car worth ~$8,000–$12,000 at decade end

Quote:

“About 12 to 16 thousand dollars in favor of buying … and if you keep the car longer than 10 years, the gap gets even wider.” — Robert [09:31]

Key Insight:
It’s tempting to focus on lower lease payments, but lease costs never end—ownership means eventual payment freedom and retained value.

Quote:

“You're on a treadmill, right? You're a hamster on a wheel, just always making a car payment... those payment-free years are where you actually build wealth.” — Austin [14:12]

5. Hidden Costs & Dealership Tricks

[12:19-15:41]

• Mileage penalties: Overages can add thousands across the lease term.
• Wear & Tear Fees: Scratches, stains, worn tires—at return, expect to pay $500–$1,500 (or more).
• Disposition Fee: Just to return the car; $300–$500.
• Acquisition Fee: Hidden in your lease terms; $500–$1,000 tacked on upfront.
• (Biggest Cost): Neverending payments—leasing means you never get payment-free years or real value from your car.

Quote:

“The dealership's not going to tell you, the salesman's not going to tell you, and I don't think most people actually understand.” — Robert [12:27]

6. The Smartest Middle Ground: Buying Used

[15:41-17:51]

• 3-Year-Old Cars: Massive depreciation drops off in first two years; buy used, get same reliability/features at a steep discount.
• E.g., $40,000 car drops to ~$26,000–$28,000 after 3 years; finance much less, own outright, and avoid worst depreciation.
• Buy and drive for a decade: True wealth-building—minimal payments, minimal “lost” value.

Quote:

“If you're trying to build wealth, buying a quality car and driving for 10 years is one of the smartest financial moves you can make.” — Robert [17:41]

7. How to Decide: A Practical Decision Framework

[17:51-19:56]

• Step 1: How long will you realistically keep the car? If 7+ years, buy. If you “need” a new car every 2–3 years, lease.
• Step 2: Calculate true total cost of ownership (payments, down payment, insurance, maintenance, and fees). Divide across years of use.
• Step 3: Consider your driving mileage. Exceed lease limits? Leasing will hurt.
• Step 4: Analyze cash flow and budget—the lower payment of a lease may be tempting if money is tight, but long-term cost is higher.
• Step 5: If you own a business, check with your accountant; the lease deduction could tip the math in your favor.

Rule of Thumb:

“Spend no more than 10 to 15% of your gross income on vehicle expenses... payment, insurance, gas, maintenance, everything.” — Robert [19:36]

8. Industry Reality & Wealth-Building Mindset

[19:56-20:57]

• Car industry wants you in perpetual debt: Dealers profit when you lease and trade frequently.
• Wealthy people drive smart, not flashy: Most high-net-worth individuals buy reliable used vehicles and keep them for years.
• Payment Treadmill Metaphor:

  “You’re on a ‘payment treadmill’ you’re never going to get off of.” — Austin [22:46]

Notable Quotes & Memorable Moments

• “Car prices are insanely high. ... The worst part is the second you drive the car off the lot, it instantly loses thousands in value in just the first year alone.” — Austin [01:55]
• “I want to own it, it’s mine. I can do whatever I want with it. I don’t owe anyone anything on my stuff.” — Austin [20:57]
• “Personal finance is personal. ... Do what works for you. And the main goal here is to make sure you understand the difference.” — Robert [21:44]
• “The average American should not be leasing a vehicle. ... Figure out how to buy a used car, pay it off, and invest the difference.” — Austin [22:46]

Listener Q&A Highlights

[23:23] Margin Accounts & Investment Losses (KA’s Question)

• Avoid using debt (margin) to invest; high risk, can blow up accounts.
• “Don’t try to do a cheat code… it usually ends up going bad like it did here for KA.” — Robert [27:03]
• Use margin only if you have liquidity to cover losses immediately.

[29:16] ETF Expense Ratios (Brock’s Question)

• Long-term holders may prefer lower-fee versions like QQQM or SPYM, but for most, fee differences are minimal and both strategies are fine.

[33:10] Car Loan Woes & Parental Assistance (Sean’s Question)

• Hosts urge Sean to ride out his high car payment—don’t sell at a big loss before promotion.
• Prioritize getting parents off the hook as soon as possible, and if promotion comes through, car payment won’t be a major strain.
• “Don’t keep the car at the detriment of maxing your Roth IRA.” — Austin [35:14]

Actionable Advice & Takeaways

• Run the total numbers for your scenario:
  Don’t just fixate on monthly payment; consider ownership cost, equity/value, and opportunity cost.
• Buying new? Be prepared for heavy depreciation; better to buy slightly used if possible.
• Leasing? Only makes sense for business owners/tax reasons, or if you truly prioritize always having a new car with manageable mileage.
• Don’t spend more than 10–15% of your gross income on all car expenses.
• Biggest hidden cost of leasing: never-ending payments; ownership is the path to wealth.

Segment Timestamps

• [01:55] – Market snapshot: new vs. used car pricing & depreciation
• [03:00] – Leasing vs. buying basics
• [05:38] – Four situations where leasing may make sense
• [06:45] – Real math comparison with sample figures (lease vs. buy)
• [12:19] – Hidden leasing costs exposed
• [15:41] – Buying used as the wealth-building play
• [17:51] – Practical framework for making your own decision
• [23:23] – Q&A: Margin investing gone wrong
• [29:16] – Q&A: ETF expense ratios
• [33:10] – Q&A: Should I sell a car bought with my heart, not my head?

Episode Tone

• Warm, practical, non-judgmental, packed with personal stories and financial truths
• Clear focus on personal empowerment: "Make choices with your eyes wide open"
• Balanced: Both hosts openly share their own (sometimes different) approaches and habits

Final Word

This episode is packed with relatable examples, memorable metaphors (payment treadmill), and a solid, numbers-first approach to one of the biggest financial decisions most listeners will make. The message is clear—run the math, know thine self, and build your habits for wealth, not for dealership profits.

“Be smart, run the numbers, make the decision that’s right for your situation, and don’t let a car payment steal your financial freedom.” — Robert [20:35]

[Share this summary. Send the episode to a friend who’s shopping for a car. And remember: owning your car, even if it’s not the shiniest on the block, may just be the best investment in your future.]