My Leased Car Is Keeping Me Broke

Brought to you by the EveryDollar app. Start budgeting for free today. I am currently leasing a vehicle and I am so excited to get done with it. My plan was to buy a beater car once the lease is up, but I have another 11 months to go on it. I'm currently 5,000 miles over already what I'm supposed to be. It's $0.25 a mile. So by the time I turn it in, I'm looking at an extra $5,000 I would pay for the overage on the mileage. So my question is, should I go ahead and buy a beater car right now? I'm thinking in the range of $5,000 to $6,000 and go ahead and park my leased vehicle, go ahead and just let that ride out. And then I'll have, pretty much I'm allocating my money to spending it on a beater now instead of giving it to a dealer at the end of the lease. Does, would that make sense? That's a great question. Could you go buy the car outright? Yeah. What's the early buyout amount? I could, it would be a little north of $40,000. Goodness gracious. What are you driving? Right now it is worth $29,000. It is an EV and so it's depreciated immensely. Ouch. So you'd have to pay $40,000 to get it. But then if you sold it, you're $11,000 underwater. Correct. Immediately. Wait, they're charging you $0.25 a mile on an EV? Yes. Wow. That should be illegal. That should be. Okay. What EV is this? What's the make and model and year? It's a Volvo C40 Recharge and it's a 2024. Oof. All right. I'd probably put this in the stupid tax category, but you're saying, hey, instead of paying $5,000 in penalties, because you're going to continue to go over the mileage based on your commute? Absolutely. Yes. You're saying just park it. I'd rather just use that $5,000 to get me a beater car so that when all is said and done, at least I have a working vehicle. Yes. That's kind of where my mind's at. Of course, it kind of breaks my brain a little bit to have two vehicles at the same time. But circumstantially, this is kind of where I'm at. Yeah. I mean, that is a pretty wild solution, but it makes sense in my head. And I'm trying to think if there's other scenarios. I'm trying to go through like, what are all of the options? And then what's the one that sucks the least? Have you talked to the dealer about this? So I haven't talked to them about this scenario specifically. I have looked to see if I'd be able to have someone else take it over and they will not allow that. By the time I buy it out, I don't know the fee. To be honest, I haven't looked at it because I'm just assuming it's so unreasonable. Hey, what's up, guys? It's Jade. Listen, my husband and I drive used vehicles and we really do plan on keeping those running for a long time. So we trust Christian Brothers Automotive to take care of them. Their team is honest. Their shops are super clean. And what I love is they don't try to upsell us on things that we don't need. I personally feel really confident walking into Christian Brothers because I know that no one's going to try to take advantage of me or scare me into unneeded repairs. Christian Brothers gets it. So schedule a service today at CBAC.com slash Ramsey and get 10% off your visit. That's up to a $250 value. See stores for details. So I could look into that. That's probably a great assumption. Gosh. I still can't get over like on an engine, a gas powered engine, there's going to be wear and tear that's unique and different than on an EV. I just can't believe they're charging you 25 cents a mile. Whatever I think they can't get worse, they get worse. It's impressive. Right. Leases are definitely my least favorite way to have a vehicle. I was going to say own a vehicle, but you don't even own it. You're just renting expensive. What's your lease payment? It's $663 a month. So you're going to have to pay that for 11 more months while it's just parked. I'll have to pay it for 11 more months while it's parked. I would try to level with them at the dealership. Not that they're competent, nice people, but I would explain the situation. Say, hey, listen, if I buy it out, I'm 11 grand under day one, after already forking over 40 grand that I assume you don't have in cash right now. Correct. The other option is the termination, which I would find out what the early lease termination fees are in case, this is a wild in case, in case it's the cheapest option, the lowest amount of stupid tax you could pay to get out of this thing, since they won't let you do a lease transfer, because the buyout is not an option. And so therefore you might at least then sort of get rid of the other options to go, okay, my best option is just hang on to it, pay it, stay under the mileage and save up for a beater car in the meantime. Do you have 29 grand? Do you have 30 grand to buy it from them? I do not. Okay. How much do you have? So right now I have $6,000 and that is a sinking fund, knowing that I am going to potentially have to pay that in fees when I turn it in. And I'm very aggressively paying down student debt. So I just don't have that cash on me. No, that's great. What do you make? What do you make a month? $6,584. Okay. I love the specificity. That's great. And what other debts do you have? So I've got a student loan and that is $21,844. And that's it? Student loan and the lease? Yes. Okay. Yeah. I mean, it's going to be hard to do both, to chip away at the student loan debt, pay the lease payment, save up for the beater car. But I like the idea of limiting the damage in fees we're paying on this lease, at least if you do nothing else. And then I would see what your options are with the dealer. I would do a whole lot of research to find out, you know, what your rights are, what your options are before you make any big moves. But my guess is it's pretty ironclad. I mean, you signed the contract, here's the fine print, and they're going to say, deal with it. Right. Yeah. And I was definitely going to take your advice to see if there's any way I can have some wiggle room that I just am assuming I don't have right now. If that is not an option, would you suggest I just park it and drive a beater? Yeah. That's what I would do. The math says that might be the best option. That's the wild part, as much as it hurts your soul to pay $660 for parking a car. Yeah. Oh, my gosh. I'm so sorry. It's already hurting my soul. I'm like, if this can minimize the damage, I'm all game. Well, the good news is you'll never lease a car again. Oh, you better bet. So that might have been worth all the fees in the world if it means you're avoiding a bad money decision. So I'm rooting for you. You're going to survive it, and it'll be a fun story you tell your kids one day to help them avoid a lease. Kelsey, give America who's listening, give them your opinion on the lease. Someone sitting there like, I don't want to buy a car. I want to go lease it. What would you say? This is your opportunity for a commercial. It is the most financially irresponsible way you could possibly operate and quote, unquote, not own a vehicle. Do not do it to yourself. Thank you for that. Very helpful. Appreciate the call, and it's a good reminder on leases, John. So a car lease, people say, well, John, it's not debt, technically. There's no loan. It's just a contract where I have to pay this amount, and there's no way out of it. Forever. Cool. If that's what you want to tell yourself, that it's not debt, even though there's a monthly payment attached that you have to pay, I'm going to call it loosely a form of debt. And the depreciation is built right into your lease payment. So you're paying the most expensive part of depreciation to the dealer. Well, and so think about, I always like to ask myself who's getting rich, right? It's the reason I quit using airline miles. And I've talked about this off air, but I remember getting a credit card with a ton of miles on it because I had to make a huge purchase that I was going to immediately get reimbursed for. And I remember thinking, hey, this company's not my friends. Who's paying for these flights I'm getting or these hotel points? And it was people who found themselves in financial straits or having to pay. And I was like, I don't want single moms who are struggling to put food on their table to pay for my free flights. I'm out of this program. So that is what got me inspired to say, who's getting rich off what I'm doing next? And the lease is one of the greatest inventions for a car company. They get a brand new car. They give it to you for two years. You basically buy down all of their depreciation. You give the car back to them. They have a gently used car that they have contractually kept. Now they can sell that and still make a profit. They sell a gently used car that's got very low miles. It's perfect with no depreciation on it because you've paid it, right? It's brutal. Create your free every dollar budget today. The simplest way to budget for your life.