Here's my financial situation.

My net worth not including student loan debt is about 4.5k. I make 95k a year but end up getting about 4k a month (after retirement saving, health insurance, etc). My rent costs 385/month, other major expenses include 200/month for health stuff, 225/month for gym, and the rest are just expenses like bars, entertainment etc.

I'm trying to pay off my student loans in a year a half, I have 26k worth of student loans.

I bought a used car for 5k in the summer and had a lot of problems with it and it's now totalled, I found a great lease deal for 300/month. Is this responsible considering my income and debt?

  • 4
    Without knowing the rest of your budget, we can't answer this, except to tell you that lease is usually the worst choice for anything but a company vehicle. Buying a new car isn't the best choice for most folks either. Buying a used car a few years old -- after getting it inspected by a mechanic you trust -- really is the best value for your money.
    – keshlam
    Dec 4, 2016 at 1:29
  • 9
    225/month for gym?! Wow.
    – NuWin
    Dec 4, 2016 at 3:57
  • Agree with above lease comments, and would add query: 1. what is student loan interest rate? 2. what percent of your salary are you deferring to retirement? 3. is it the maximum allowed under your plan? 4. do you have any savings? how much? could you live for 6 months on that amount, in the event of unfortunate employment event? 5. do you really need that $225 gym? 6. how old are you? married? children? I'd counsel avoiding entangling liabilities if at all possible.
    – michael
    Dec 4, 2016 at 17:47
  • 1
    @NuWin crossfit is expensive, im reconsidering if its worth it, but Im definitely in better shape than I've ever been in my life. Dec 5, 2016 at 17:41
  • 5
    You have some very odd pricing in your budget. Your rent is unbelievably cheap but then you pay more than anyone I've ever heard of for a gym membership. I'd join a regular gym before worrying about my car expenses if I were you.
    – farnsy
    Dec 6, 2016 at 3:45

3 Answers 3


With a gross income of $ 95,000 per year, and a net savings rate of over $ 18,000 per year, a budget of $ 3,600 per year for automobile interest and depreciation is not irresponsible.

But poor car choices, poor car maintenance habits, and driving habits that risk totalling cars are irresponsible. Also, not fully understanding a lease deal is irresponsible.

The "great lease deal" might be encouraging you to make a different "poor car choice" than you made last time. A "great deal" on a bad car is not really a great deal. Also, depending on the contract and your driving habits, you might have a surprising cost at the end of the lease.

  • 1
    Remember that "totaled" doesn't necessarily mean "accident", it can be "requires repair/maintenance costing more than the value of the (after repair) car" And while that might be poor maintenance habits, it could also be a result of treatment by the previous owner.
    – Ben Voigt
    Dec 6, 2016 at 23:53

Some questions:

Will you need a car after 18 months? What are you going to do then?

How likely are you able to go over the mileage?

Granted paying $300 per month seems somewhat attractive as a fixed cost. However lease are notorious for forcing people into making bad decisions. If your car is over miles, or there is some slight damage (even normal wear and tear), or you customize your car (such as window tint) the dealer can demand extra dollars or force you to purchase the car for more than it is actually worth.

The bottom line is leasing is one of the most expensive ways to own a vehicle, and while you have a great income you have a poor net worth. So yes I would say it is somewhat irresponsible for you to own a vehicle.

If I was in your shoes, I would cut my gym expenses, cut my retirement contributions to the match, and buy another used car. I understand you may have some burnout over your last car, but it is the best mathematical choice.

Having said all that you have a great income and you can absorb a lot of less than efficient decisions. You will probably be okay leasing the car. I would suggest going for a longer term, or cutting something to pay off the student loans earlier. This way there is some cushion between when the lease ends and the student loan ends.

This way, when lease turn in comes, you will have some room in your budget to pay some fees as you won't have your student loan payment (assuming around 1400/month) that you can then pay to the dealer.

  • I believe I will be driving less than 7,300 miles a year. So I will look closely at the lease agreement but I think I should be fine on miles. My plan is to move walking distance to work within a year, so I may decide to not have a car afterwards, and just uber. Dec 5, 2016 at 17:40
  • Perhaps price doing a long term car rental. I don't like your lease being up the same month your student loans are done and would really look to avoid that. Also if you move within a year, you might be stuck making lease payments on a car you don't need.
    – Pete B.
    Dec 5, 2016 at 17:49
  • How about getting a bike instead? It's good exercise, would still be handy when you move within walking distance of work and is a lot cheaper. A bike + mass transit or an e-bike can make longer/harder rides viable too. From your ~7k miles a year I'd assume work to be something in the low teens miles for you which is certainly viable for a bike. Dec 5, 2016 at 19:24

Presumably you need a car to get to work, so let's start with the assumption that you need to buy something to replace the car you just lost. The biggest difficulty to overcome in buying a car is the concept of the monthly payment. Dealers will play games with all of the numbers to massage a monthly payment that the buyer can swallow, but this usually doesn't end up giving the customer the best deal. The 18 month term is not normal for a lease, typically you'll see 24 or 36 months. You are focusing on another goal of paying your student loans by then which would free up much more money for other wants (like a car) but at what cost?

The big difficulty of personal finance is the mental mind game of delaying gratification for greater long-term benefit. You are focusing on paying your student loans now so that you can be free of that debt and have more flexibility for the future. Good. You're tempted to spend another $5400 (assuming no down-payment or other surprise fees) to drive a car for 18 months. That doesn't sound any wiser than $5,000 for an unreliable used car that gave you more problems than you bargained for. Presumably you got some percentage of that money back from the insurance company when the car was totaled, but even if not, the real lesson should be finding a car that you can afford up-front, but also one that you can still use when the loan is paid off (like your education--that investment will keep giving even when the loans are a distant memory).

My advice would be to look for a car that has about 30k miles on it and pay for it as quickly as possible, then drive it at least for 70-120k more miles before replacing it. You may wish for a newer car, especially in 3 or 4 more years when it starts to show its age, but you'll also thank yourself when you can buy a newer better car with cash and break out of the monthly payment game that dealers try to push on you. You might even enjoy negotiating with car salesmen when you see through their manipulations and simply work for the best cash price you can get.

  • I think Im stuck in the mental game now. I was able to work out a lease deal for $150 a month for 36 months on an electric car. I was looking at this option because all the incentives offered by CA government for electric cars. Its an affordable monthly payment and no gas cost. So your talking 5,400 for the car lease for 3 years but assuming gas costs of $1000/year. Im saving $3000. It doesn;t make a lot of sense to buy used electric car because the incentives dont apply for used cars. What do you think? Dec 6, 2016 at 2:48
  • Electric cars and leasing vs. buying is probably worthy of asking an entirely new question. If you don't I will. Dec 6, 2016 at 15:48
  • @DanielJacobson money.stackexchange.com/questions/73449 Dec 7, 2016 at 16:54

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