A friend of mine leases a new car every three years. Beautiful cars — leather seats, that new car smell, the works. He pays five hundred dollars a month and owns nothing at the end of the lease. Over ten years, that is sixty thousand dollars. Gone.

I bought a three-year-old Honda Civic for fourteen thousand dollars five years ago. It is worth about eight thousand today. My total cost over five years: six thousand dollars in depreciation, plus maintenance. When I sell it, I get money back. When his lease ends, he gets a ride to the dealership.

The Math

New cars lose 20 to 30 percent of their value in the first year. By year three, most cars have lost nearly half their original price. When you buy a three-year-old car, the steepest depreciation has already happened. You are paying for a reliable car that someone else already took the financial hit on.

A lease payment covers that first-year depreciation — you are literally paying for the most expensive part of the car’s life and then giving it back.

What to Look for in a Used Car

Buy three to five years old with under 60,000 miles. Look for a single owner with maintenance records. Avoid cars that spent their life in snowy states — road salt eats the undercarriage. Pay a mechanic a hundred dollars to inspect it before you buy. If the seller refuses the inspection, walk away.

The One Time Leasing Makes Sense

If you absolutely must have a new car every three years and you drive under 12,000 miles annually, leasing is not insane — it is just expensive. But do the math yourself. Add up three years of lease payments. Then look up the three-year-old version of that same car and see what it costs to buy. The difference is the price of wanting that new car smell.