Core77

"Shark Tank" Millionaire Explains Why Buying or Leasing a Car is Stupid

"You can choose the level of luxury you want"

By Rain Noe - December 4, 2019

in Cars

Before he became a judge on "Shark Tank," Kevin O'Leary founded and ran an educational software company. When Mattel acquired it in 1999, O'Leary became a multimillionaire (current estimated net worth: Roughly $400 million).

Until a couple of years ago, he drove a Mercedes SUV, as plenty of millionaires do. When the lease ran out, he not only refused to upgrade, but ditched car ownership/leasing altogether. "You're thinking about buying a car. Let me give you a new idea: Don't," O'Leary told CNBC Make It.

Photo by Kaboompics .com from Pexels

"Cars cost a fortune in maintenance and insurance and just the amortization, which means as they go down in value, you're losing money," O'Leary explains. "Let's say I pay $25,000 for it. Two years later, it might be worth only 12 [thousand dollars]."

Photo by Mike from Pexels

Instead, O'Leary uses mass transit and ridesharing services.

Photo by JESHOOTS.com from Pexels

"You don't need a car. You're working in a city where you can either take the subway or basically use a shared service. Try both.

Photo by Alex Powell from Pexels

"I use my phone to call Uber or Lyft and they take me around the city. I save a fortune.

"Even if you use a car every day to get to work, it's still cheaper to use a shared ride service, because you can choose the level of luxury you want. You can share the ride with somebody else.

"But don't get stuck parking $25,000 into a car. I don't need it. Why should you?"

It's a little more complicated for my wife and I, living as we do in a rural area. Our farm is regularly circled by vultures and hawks, not Ubers and Lyfts. Her truck died a couple of months ago and now we're down to just my station wagon. This has led to some issues that I'll discuss in another post, but I thought you might like (or like to debate) O'Leary's points.

o

Favorite This
Q
16

Comment

Comments

Juan Cano

5 years ago

Z

4Z

Reply

I live in Suburbia and to take public transportation would take over an hour to get to work instead of 20 minutes. If I took and Uber back and forth to work everyday, it would cost me $45 per day x 20 days= $900/mo. I lease a Hyundai Elantra for $165/mo (granted I put down $2000). His thought on depreciation is correct but unrealistic for most areas.

!Report as spam
Nathan D.

5 years ago

Z

1Z

Reply

Back home on his native Ferenginar Kevin O'Leary is ignored but here on Earth we pretend to care what he thinks or says or does in hopes that he will simply stop talking and go away.

!Report as spam
. JC

5 years ago

Z

Z

Reply

Based on his argument won't buying a 2nd hand car be an option as well?
There are many who just don't feel comfortable sharing cars with strangers.

Only really make sense if the subway or buses fit where you live and work.
Taking private hire cars is not worth the money.

!Report as spam
Charles Davis Langer

5 years ago

Z

Z

Reply

Both Kevin and Mark Cuban, on the Shark Tank, can be spot on about some things, and absolute morons about others.

!Report as spam
Jimmy Ting

5 years ago

Z

Z

Reply

He forgot he owns a boat

!Report as spam
Billy Baggins

5 years ago

Z

Z

Reply

i wish i was incredibly wealthy so i too could become so out of touch with reality.

!Report as spam
P Z

5 years ago

Z

Z

Reply

For the few parts on the US where public transportation is actually viable he's right. For everyone else, making a smart car choice can do a whole lot to reduce long term expenses and loss in value ie. don't buy a German luxury SUV.

!Report as spam
- Alex Caggiano
  
  P Z
  
  5 years ago
  
  Z
  
  Z
  
  Reply
  
  4
  No, he's not correct anywhere I imagine.
  
  I live in NYC where he's talking about doing this. Specifically, I live near Bushwick, Brooklyn.
  
  I did the math just recently. My honda civic lease 3y/30k mi + insurance + gas + excess wear and rim and tire coverage was $401 a month. In the 3 years I never had to buy new tires I used roughly 23k miles so oil change every 7k miles that's like $200 in oil changes, so that's $5.50/Mo.
  
  Total monthly calculated from 3 years backward over estimating was $406.50
  
  My uber to and from work alone this month at off-peak times/ no surges only UberPool calculated underestimate (without any tips i gave calculated) is $500.
  
  Now, I'm planning on offsetting this by using my motorcycle and public transit during nicer weather. But saying ridesharing can replace a car is just straight-up wrong. Its been only 2 months are already buying groceries is tougher, traveling out of state is tougher, getting to and from work is mindless and comfortable, but it's less reliable time-wise. When I want to go snowboarding in Vermont its gonna be a car rental.
  
  All those difficulties im trading for "struggling to find street parking from 9pm-9am, driving through Manhatten.
  
  !Report as spam
  - Charles Davis Langer
    
    Alex Caggiano
    
    5 years ago
    
    Z
    
    Z
    
    Where it gets complicated is paying for parking, parking not available nearby- possibly at both home and work.
    Having to be at multiple locations daily.
    But I agree, I don't want to give up pov option.
    NYC would be much better with a scooter share service.
    
    !Report as spam
Donald Jones

5 years ago

Z

Z

Reply

I have a horse. Hell they're edible for God's sake.

!Report as spam
- Billy Baggins
  
  Donald Jones
  
  5 years ago
  
  Z
  
  Z
  
  Reply
  
  fighting climate change one equine at a time.
  
  !Report as spam
j l

5 years ago

Z

Z

Reply

I get so sick of blithe "Everyone should do what I do" comments like that.

In fact, I do follow his advice - since I joined the workforce about 25 years ago, I've owned a car for about two. (It was stolen, and I was actually a little happy about that at the time.)

But then I've spent those years in NYC and San Francisco with no kids. It is crazy to assume my lifestyle translates unchanged back to the rural place I grew up, or even the 'burbs. Or with mini-people to cart around and feed. Or if I did something for a living that required moving objects around. Or...

Honestly I've never seen this guy on TV, I don't want much and hate shows like that. But I do work in software development, and self-designated Smart Guys (they're always men) like that are legion. They know exactly how you're doing it wrong and are very happy to tell you all about how they know better. That anyone would want to watch that as performative entertainment demonstrates the rich variety of life, I guess.

!Report as spam
Bradley Johnson

5 years ago

Z

Z

Reply

Sounds good if you live in New York City. Everywhere else in America... not so much.

Automobile depreciation is a real concern though. It doesn't make much sense to purchase a new car, when the same car with 10k-15k miles on it is drastically cheaper (many people lease cars for only 1 or 2 years before turning them back in). Also, some vehicles hold their value better than others, so one should take that into consideration.

!Report as spam
Ray Jepson

5 years ago

Z

Z

Reply

I just read a report on transit in Montreal. There has been a significant decrease in commuters travelling downtown with their cars and an equal increase in those taking mass transit. I think a lot of people are already taking O'Leary's advice!

On the other hand, the report said that more and more people are commuting between suburbs rather than to downtown. These people, like Juan, have no good mass transit options. It's either drive a car 30 minutes or take 3 buses that take 1.5 hours (it was that way when I was commuting between suburbs).

I think we are facing a massive public policy problem as the growing suburbs are desperately needing better mass transit, but our suburban politicians only see the car as a realistic solution.

!Report as spam
hans henderson

5 years ago

Z

Z

Reply

Corruption and propaganda brainwashed the "car culture" addiction into America for over a century, and it will be difficult for us to return to rational public interest in our transportation systems.

Very much intertwined with systemic racism as well, land use regs etc embed environmental harm, coerced over-consumption and social inequality into the design of our communities.

!Report as spam
- Charles Davis Langer
  
  hans henderson
  
  5 years ago
  
  Z
  
  Z
  
  Reply
  
  Let me kill myself then, life is just not worth living.
  
  !Report as spam