Decision to purchase car at end of lease based on debt, income

I made the mistake of leasing a car a while back, and the lease is up in about 9 months. Should I save the money between now and then to buy it, or save as much as I can to pay down my student loans?

–Aaron

Dear Aaron,

At the end of a lease, the price for which you can purchase the car is called the residual value. This amount is preset when you lease the vehicle. So the big question right now is, what’s the car actually worth?

If the company thought it would be worth $12,000 and it’s actually worth $14,000, that would be a good deal, and you’d want to buy it instead of turning in the car. Even if you were going to turn around and resell it, you’d still want to go ahead and buy. Another important thing is that I’d never tell you to finance a car after the lease term. There’s no difference between that and walking onto a car lot and financing any other $12,000 car.

Look at it this way. You basically have a $12,000 car loan right now, and you’d only be changing the format from leasing to payments if you financed the thing.

Should you keep this vehicle? Only if it’s a small percentage of your income. If you make $60,000 or more, I’d probably say save up, pay cash, and keep the car. But if you’re making closer to $30,000 the answer is no.

–Dave 

Fun to date,
but not to marry

Dear Dave,

I’m dating a man who is really exciting and fun, but he has well over $100,000 in debt. He has nice cars, a boat and he travels a lot, and he does it all on credit. He wants us to get married, but his view of money worries me. What should I do?

–Vickie

Dear Vickie,

The fact that you’re worried about this situation means you realize that fun and exciting don’t necessarily translate into being wise. I’m sure he’s a nice guy, but your concern tells me that you two are from completely different planets when it comes to handling money. And that can be a death knell to a marriage.