In personal finance, there is conflicting advice on whether you should buy the car outright, or lease it.   In almost all answers in business and investing, well actually most questions we deal with in life – it depends.   Personally, I don’t actually really think it matters either way, at least not that much.  What really matters is how MUCH of a car you get.  That’s what I’m concerned with.   If you want to split hairs doing the math to see how much you save with buying vs leasing, be my guest.  What I would look at is the total price you pay for the car!   Wow, imagine that rocket science I just dropped on ya.   

Are You Driving a Car, Or Stroking Your Ego?

Let’s take my friend Mike.  Mike is a young, high earner.  When Mike heard I was selling my Benz, he reached out.  It was an E 350 with 135,000 miles on it.  Book value was $7,000, however I knew if I traded it in I’d probably get $4,000.  I could have probably gotten closer to $6-7k if I wanted to max it out, but I let it go for $5k for a quick clean cash sale to someone that I knew and liked.  Mike drove the car for 3 years, and then resold it for $5k.  Used, high quality foreign cars like this hold their value pretty strong.  This car could probably go to 300,000 miles before it gives much trouble.   Do you wonder why Mike saved up $185,000 in cash in the course of a few years?

One of the primary reasons people buy more than they should in any purchase is because they want to look good.

We’ll pretty much do anything possible to get these top human needs fulfilled. Men want respect, and women want to be loved. We will do what we can to fulfill these needs, often at our own long term detriment.   When I was 22 and fresh out of college, my friends somehow convinced me that I just had to get a new car because I was making a pretty nice income.   On top of that, I had been ridiculed quite a bit for starting an alternative business, so a brand new BMW 3 series would be my way of giving all of them the big middle.   Jim Rohn comedically said – “Sometimes a little revenge is ok on your goals list.  Get that new car and drive it up on their lawn!”   In looking back, although I had a good income coming in, I definitely didn’t have the cash flow and net worth to justify that purchase.   I was trying to look good, and it cost me a huge amount in future growth.   I wasn’t able to invest much in those early years because I was saddled with expensive car and insurance payments when I already had a decent car completely paid off. 

Are You Driving a Car, Or Stroking Your Ego?You guys start making decent money and you just can’t help yourself.  I’ve seen people over the years who I know I make 5-10x more than and they are driving a nicer car than me.  They roll up with their $70,000 car and they have less than $10k in the bank (by bank I mean net worth).  It just makes no fucking sense.  When I sold that car to Mike, which I was totally happy driving by the way – the income from my ASSETS paid the monthly payment on my next purchase,  a $100k Tesla.  Meaning my saved up cash from a little discipline was put to work for me earning income from interest, rents and dividends.Jack Gibson

I could now drive the car stress free, knowing I EARNED it.  It was a much better overall driving experience that had zero stress or guilt.   But the Tesla didn’t make me any happier.  I was just as happy in life driving the Benz.  I’m not attached to material objects though and don’t get my sense of self worth or respect from the car I drive or the house I live in. My self worth comes from my relationships and  the value that I provide to others through helping, coaching, encouraging and strategizing.