Yeah, we're all a bunch of old fogeys, that's why we hang around a diesel 'Benz board.

You'll never win this arguement with him. It's a personal choice as to what percentage of his income stream (for leasing) or what percentage of his net worth (for purchasing) will be represented by automobiles. This is a subjective decision, one which most people make unconsciously.

The basic tradeoff is, of course, that money spent on a vehicle cannot be put to other uses - be they travel, entertainment, or bulding wealth. This last one is the one which generally suffers due to excess consumption.

If your friend chose to purchase a modest vehicle and keep it for the duration of its useful lifetime he would be able to generate a more robust stream of capital to invest. You're well familiar with the time value of money and realize the wealth which can be accumulated via a stream of monthly investments. Eventually this wealth would permit him to purchase vehicles outright. He could avoid the financing costs associated with monthly payments, lowering his cost of owning any given vehicle.

His decision to take on an expensive monthly lease is simultaneously a decision not to accumulate this wealth. This of course increases the opportunity for auto makers to lock him into monthly payments - and collect interest payments from him - forever.

How's that for a doomsday scenario?

The other big problem with leasing is that it removes your ability to decide the timing of when to acquire your next new car. When the lease is over, you are forced to act. In the U.S. at least, leases are written to dissuade you from purchasing the vehicle at lease expiry - the buyout price is almost always substantially higher than the fair market value of an equivalent vehicle.

The big risk here is of course that you may be unwilling or unable to acquire a new vehicle when the lease expires. What if you have a job loss, or just purchased a house? Your ability to control your transportation costs going forward is substantially diminished by leasing a vehicle.

My $.02

- JimY