Q. I lease my car rather than buy. Every three years I get a new vehicle. Depending on how much I put down and the condition of the old vehicle, that determines my lease price. Am I better off leasing than buying? ---E.R., by email
A. A few people will be better off leasing than buying. This will happen because they shop very carefully and lease a car from a manufacturer who is underestimating depreciation in an effort to “move metal,” boosting car sales by offering great lease deals.
But deals like that are rare. They tend to be in the luxury brands. For most people leasing almost guarantees high costs because it commits them to paying for the high depreciation years of a new car and regular payments of a sales tax.
The best way to reduce the burden of depreciation and sales taxes is to own your car for a long time. With cars now being built to last 200,000 miles, or more, you can minimize depreciation with only modest exposure to increased repair bills.
The math here is pretty compelling. Suppose you buy a $30,000 car that loses half its value in 4 years, a typical amount. If you drive 10,000 miles a year that $15,000 of depreciation is equal to 37.5 cents a mile.
But if you drive the car another 4 years and it depreciates another 50 percent, the depreciation will be half as much, $7,500. Your depreciation cost per mile will be only 18.75 cents a mile. At the end of the 8th year your car will still have only 80,000 miles on it. It will still be “young” by today’s standards.
If you lease a car, however, you will be committed to repeating that 37.5-cent-per-mile-depreciation, over and over again— along with repeated sales tax bills. One of the most pleasant ways to play the long-term ownership game is to buy a high quality car and take good care of it. Own it for six to eight years and your depreciation cost per mile will be about the same as owning a lesser car but replacing it every two or three years.
Q. I've written to you before about housing costs in retirement, but I feel like I'm
between a rock and a hard place! I live in Chicago. Apartment rentals have skyrocketed in the nicer areas of the city. About $1,700 a month is the norm for a 'studio' in a downtown hi-rise now. Of course, you can rent for less in some of the outlying or 'sketchy' areas of the city. I really don't want to live in those areas.
I am giving serious thought to Las Vegas – and to getting away from our winters.
I'm torn between a rental and buying a small condo. Most of the homeowner association fees I've seen in Las Vegas are quite reasonable -- but they only go up!
I have a good friend who lives in Las Vegas. He has offered his spare bedroom to me for any period of time to search--- but my present landlord wants 3 months rent to break my lease.
Any light that you can shed would be greatly appreciated. ---P.O., Chicago, IL
A. Buying in a new city before you know it can be a disaster. Why don’t you make regular and long-ish visits to Las Vegas while your lease is running? It will help you get a better feel for where you’d like to locate in Las Vegas.
If you visit the websites that offer to compare living costs between Chicago and Las Vegas you won’t find a gigantic difference at some. Two that I checked, for instance, showed that Las Vegas is about 5 percent cheaper. While rents and housing prices are lower in Las Vegas, many other expenses are higher.
If you visit Numbeo.com, however, you’ll find a long list of things that are much less expensive in Las Vegas, suggesting a much bigger drop in your cost of living. The Las Vegas sales tax is 8.1 to 8.15 percent while the Chicago sales tax is 9.25 to 10.25 percent. And Nevada has no state income tax.