Some buyers only have one requirement when shopping around for their next vehicle and that is a cheap monthly payment, and that’s okay. Consumers have two ways to affordably get into a new car without having a lot of money and that is finding a vehicle that is either cheap to lease or cheap to finance. And sometimes a lease can end up being more economical than financing a vehicle, here’s how.
Before getting into a contract, lessees can decide on the annual mileage they want to be able to drive without a penalty as well as how long they will keep the car, and both of those contract terms affect the amount one pays to lease the car each month. Since more miles leads to more depreciation, contracts with lower annual mileage limits are more affordable. The same thing applies lease lengths, generally, the shorter a lease is, the more affordable the monthly payment. So leases can be made more affordable if you know what to ask for.
While it can be a great financial move to save up enough money to make a substantial down payment on a vehicle, if you are paying a lot of money for transportation while you save up that money, you might be wasting a lot of money and not doing yourself any good. That scenario doesn’t apply for people who can rely on mass transit for their daily commute, but it does apply to people who rely on individual transportation services, even if that is just for half of their commute. Here’s an example:
Let’s say a bartender in Florida spends $11.00 on an unlimited monthly bus pass and he uses the bus to get work, but when he gets off work, the bus is no longer in operation, so he has to pay for a ride home. If that ride home is $12 and he pays for a ride home five times a week, he spends $60 a week or $251 per month (with the cost of the bus pass) to get to and from work. Then, he spends about $20 per week on transportation for other activities, like going out and getting groceries. After paying for transportation costs ($331 per month) and all of his bills, the bartender is able to save $300 per month to put toward a down payment and after a year, he has $3,600 to put towards a down payment, which is okay, but not great.
But if the bartender spent, $250 to lease a car, $30 per month in gas, $150 per month on insurance (a total of $430 per month) and saved $200 per month for a down payment (which adds up to $630, the same amount of money he spent each month on the bus and other methods of transportation when he wasn’t leasing), by the time his 2-year lease is up, he has $4,800 dollars to spend on a down payment, which results in a lower monthly finance payment, lower insurance premium, and since he was able to improve his credit score while he made on-time lease payments for the last two years, that also helped him save a little money on his finance payments every month.
People who finance a car are paying money to borrow money to buy the car (the interest), and generally people spend a lot of money to borrow that money. Though people are also spending money to ‘borrow’ a vehicle when they lease a car, the amount someone spends to make up for the amount the vehicle depreciates is a lot less than the cost of a loan, and that is especially true for people that have long finance terms or finance a lot of money.
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