Wow! Maybe I Can Afford It After All

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Image result for I Can Afford It After AllWe’ve all been faced with it before. You’ve wanted something very badly for a long time, but just couldn’t quite come up with the money for it. In total frustration, it continues to elude you no matter how hard you try.
It would seem that the gods are against you once again. You’ve just found the vehicle of your dreams. It’s the right model, the right color and has the exact list of options you want included. But, how can you afford it,
Well, have you ever considered automobile leasing in lieu of buying, Yes, that’s right, leasing – not renting. And, there is a BIG difference.
But, why should you even consider leasing at all, After all, that’s just like throwing your money down the hole – right, Well, not really; as you will see shortly.
First, let’s examine the basic difference between automobile buying and automobile leasing. When you buy, you pay for the entire cost of an automobile, regardless of how many miles you drive it or how long you keep it. When you lease, you merely pay for that portion of an automobile’s value which you effectively “used up” during the time you’ve been driving it (the lease period).
The portion that is “used up” is commonly know of as “depreciation”. Now, whether you buy or lease, you’re going to lose the depreciated value of the vehicle over time – that value’s gone no matter which program you choose. When you buy, you are effectively investing your money in an asset with a declining value. Rarely will it every be worth what you have paid for it originally. However, when you lease, the “depreciation” is all you’re paying for because you’re not “buying” the vehicle per se – you’re merely reimbursing the leasing company for the depreciation lost while you are enjoying the use of the vehicle.
Another point to keep in mind that differentiates leasing from buying is that you have the option of making a down payment or not when you sign the lease. It’s entirely up to you. Yet another benefit to leasing is that in most states, you only pay the sales or use tax on your monthly lease payments, rather than on the entire purchase price. How cool is that,
But, what does all this mean to you in dollars and cents, Let’s say that you “lease” a $25,000 automobile for 24-months. At the end of this time, it should have a resale or “residual value” of about $13,750. You will only have to pay the $11,250 difference (or, “depreciation”), plus any finance charge(s), registration fees and taxes; as well as any other incidental fees for doing business. When compared with buying (considering merely the principle amounts), there is an opportunity to save approximately $13,750.
After the lease is up, you have the option of either returning the vehicle to the leasing company and walking away (having no further financial obligations) or, you can purchase the vehicle at a predetermined price commonly referred to as the “residual value”. Your choice.
When you buy, you will have to pay the entire $25,000, plus the finance charge(s), registration fees, taxes; and any other incidental business fees (no choices here). However, you do own the car after you have repaid the loan; although its value will be considerably less than the $25,000 plus that you have paid for it – probably in the neighborhood of $8,200 after five (5) years.
This difference is why leasing can offers significantly lower monthly payments than buying. Plus, you usually don’t have to tender a large down payment at the inception of the deal unless you wish to. Again, your choice.
The down side to all this is that, unless the purchase the vehicle at the end of the lease, you will never own the vehicle. You will only have the right to use it during the lease period – normally, two (2) or three (3) years. However, if you continue leasing automobiles, you have the opportunity of acquiring a new automobile every two (2) to three (3) years.
While all this may sound enticing and provocative, there is much, much more to consider (and perhaps, learn about) regarding the “in’s and out’s” of automobile leasing before making any final decision(s). After all, they couldn’t possibly make it that easy for you, could they, But, that’s another story for another time.
The next order of business it to determine if leasing is really right for you.

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