The 8 Year Guideline: When to Lease vs. When to Buy a Car

Introduction

Car shopping can be a complex decision-making process, especially when it comes to choosing between leasing and buying. The "8 Year Guideline" provides a simple yet effective guideline to help you decide whether leasing or buying is the better financial option for you. This rule suggests that if you don't plan on keeping a vehicle for at least eight years, leasing may be the more advantageous choice. Here's an in-depth look at how the 8 Year Guideline works and how Leasify can make this decision even easier.

What is the 8 Year Guideline?

The 8 Year Guideline is a straightforward guideline that helps consumers decide whether to lease or buy a vehicle based on their long-term plans. According to this rule:

• Long-Term Ownership (8-20 years): Buy the vehicle
• Short-Term Usage (3-7 years): Lease the vehicle

This rule takes into account the financial implications of both options over time, aiming to maximize value and minimize costs.

Breaking Down the 8 Year Guideline

Buying New vs. Leasing New

Let's compare the financial outcomes of buying and leasing a new $40,000 vehicle under different scenarios:

Scenario 1: The Buyer

• Cost: $40,000 vehicle
• Payments: $675/month for a 6-year loan at 3.99%
• Outcome After 3 Years: Equity ~$1,300, Total Paid ~$24,300
• Outcome After 6 Years: Equity ~$14,600, Total Paid ~$48,600
• Outcome After 8 Years: Equity retained, overall lower cost

Scenario 2: The Lease

• Cost: $40,000 vehicle
• Payments: $500/month for a 3-year lease
• Outcome After 3 Years: Equity none, Total Paid ~$18,000
• Outcome After 6 Years: Equity none, new vehicle after 3 years, Total Paid ~$36,000
• Outcome After 8 Years: Continuous lease payments, higher total cost

From these scenarios, it's clear that if you plan to keep the vehicle for only a few years, leasing could save you money upfront. However, if you intend to keep the vehicle for a longer period, buying might be more cost-effective in the long run.

Applying the 8 Year Guideline with Leasify

Leasify simplifies the decision-making process by providing tools and resources to help you evaluate your options effectively.

Advanced Matching Algorithms

Leasify’s advanced matching algorithms align lease offers with your preferences (make, model, budget, vehicle type, lease duration), ensuring personalized and financially viable options.

Credit Score Range Matching System

Leasify’s system uses soft credit checks to match you with lease options without negatively impacting your credit score.

Case Study: The 1.5% Guideline

To complement the 8 Year Guideline, Leasify also employs The 1.5% Guideline:

• Good Value Lease: Monthly payment equals 1.25% – 1.5% of the vehicle's MSRP
• Bad Value Lease: Monthly payment exceeds 1.5% of the vehicle's MSRP

Example: For a car with MSRP $40,000 → 1.5% = $600. A lease payment of $600 or less is good value.

Additional Considerations

• Mileage Limits: Typical leases 10k–15k miles/year. High mileage up to 30k possible.
• Wear and Tear Charges: Keep vehicles in good condition to avoid penalties.
• Lease End Options: Return, buy at residual, or extend the lease.

Conclusion

The 8 Year Guideline offers a valuable framework for deciding whether to lease or buy based on your plans. Leasify simplifies this process with tools, recommendations, and transparent information, making car shopping less stressful.