An important financial decision we all make, especially when it comes to cars, is lease vs own. I received some poor advice on this when I was young. Since I don’t want people to repeat the same mistakes I made, let’s go over the two options and what makes more sense.

Lease vs own: How I flushed 14 grand down the toilet

lease vs own

The question of lease vs own comes down to this: Leasing lets you drive a swankier car than you can afford to buy outright. But it also means you never get out from under having a car payment.

In 2000, I needed a car. I let someone talk me into leasing a Dodge Neon. The monthly lease on it was about $400, and it was a piece of junk. When the time came to turn it back in to the dealer at the end of the lease, the car could barely run on its own power.

By the end of my three-year lease, I’d paid nearly $14,000 and I had nothing to show for it. Not even a car that was used up at the 36,000-mile mark.

It allowed me to drive a new car in my mid-20s, but nobody cares anymore what kind of car I drove in 2002. That car cost me 39 cents a mile to drive, before gas.

Lease vs own: My Neon replacement

When the Neon gave out, I bought a year-old Honda Civic. I paid somewhere around $18,000 for it. I financed it for five years but paid it off in closer to three, so the interest rate wasn’t too onerous. At the end of three years, I still had a car. It was anything but a status symbol, but it had plenty of life left in it.

I ended up putting about 200,000 miles on that car. I sold it to my mechanic for $1,000 and he put another 35,000 miles on it before the transmission finally gave out.

That Civic never was much of a head-turner, and it quit turning heads for good sometime around 2005 or 2006. But that car cost me 8.5 cents a mile to drive, before gas.

People looked down on me for driving that car. But I don’t care, because I had better things to do with that money than sink it into a car they deemed worthy of their respect. I replaced it with a slightly used Toyota Camry hybrid, which set me back around $20,000 since it had more miles on it than the Civic had when I bought it.

With kids in the picture now, the Camry is more practical. I plan to put it through the same routine: Service it when it needs it, and put 200,000 miles on it.

When leasing makes sense

Leasing makes sense when you want to never drive a car more than three years old. The sales pitch with a lease is that you’re buying the depreciation, so you only pay for the portion of the car you use. The problem with that model is that you’re buying the most expensive portion of the car. As you build up a credit score from making these payments on these new cars, you can get an ever nicer car each time and end up driving a rather swanky car by the time you’re in your mid 30s. But you’ll always have a car payment.

If you always have a car payment of $400 a month, that means you’re spending $4,800 a year on transportation before fuel and maintenance. If you work for 40 years, you will have spent $192,000 on cars, with nothing at all to show for it.

Under my model, I’d spend $80,000 over 40 years on cars by buying cars for $20,000, keeping them 10 years, and come out $112,000 ahead. That’s a lot of money. That’s enough money to retire a year or two earlier. If I can squeeze an extra year or two out of each car, I come out even further ahead.

What I do with my money instead of leasing cars

Rather than staying on a treadmill of endlessly leasing cars, I sank the money I wasn’t spending on cars into paying off my mortgage early, then buying real estate. Most of my tenants have nicer cars than me. But while they’re making payments on those cars, I’m making payments on the house they’re living in and the driveway they’re parking that car on. And I’m using their rent money to do it. I’d rather have the house and the driveway.

Retirement is why this money matters

The money matters because of retirement. Here are two sobering numbers: 69 percent of Americans have less than $1,000 in retirement savings. That means they can’t afford to retire because they’ll run out of money in a matter of months, assuming they get social security. And 61 percent of Americans were forced into retirement earlier than they planned.

So the odds of being forced into retirement before you can afford it aren’t exactly in your favor. When that happens, you end up not being able to get good-paying jobs you’re qualified for because of age, so you take a minimum-wage McJob that’s way beneath you because no one else will hire you. Age discrimination is illegal, but it happens all the time.

People can look down on my decision to drive a Honda Civic with 200,000 miles on it all they want. If you’re 72 years old, working 39 hours a week at minimum wage and trying to get by on that plus social security, that Civic might not look so bad.

Lease vs own works out the same in other things too

The math works the same when you lease other things too. Not only do I not lease computers, I buy off-lease computers. The computer I’m typing this on probably sat on some director’s desk for 2-3 years, then it eventually found its way to me. It was an expensive computer when new, but I paid a couple hundred dollars for it. It’s a higher quality computer and faster than a new model that costs $300. I don’t know exactly how much life I’ll get out of it, but I can safely bet on at least five.