These were the famous words spoken by the super-rich oil baron Paul Getty:
If it appreciates, buy it. If it depreciates, lease it.
If you apply this good advice to the high value items that you acquire like your house and your car you can see that it still makes sense. When house prices are on the increase it makes sense to buy, if you can. But if house prices are falling then it would make more sense to rent, at lease temporarily, until the market picks up.
When you think about your car it makes even more sense. If you were to buy yourself a brand new car it is likely to have depreciated in value by up to 33%, even before you have driven off of the garage forecourt. Of course this doesn’t apply to all models. Certain prestige vehicles have a long waiting list and buying one of these can actually be a good investment.
However, if you want to replace your car in 2009 by far the best option for most people is leasing. Leasing cars for personal use brings many advantages, not least being you are insulated from the effects of depreciation. Your monthly payments are fixed for the duration of the lease so you can budget accurately each month. What’s more, you will find that current personal car leasing deals are very competitive when compared with what a bank loan would cost to buy the same car.
So Mr Getty’s advice still holds true today. If something is likely to increase in value then it makes sense to buy it, but if the value is likely to fall, see if you can rent or lease for a while.
