Know How Much Car You can Afford to Lease
Knowing how much car you can afford to lease is important if you aren’t familiar with how lease payments are calculated. It also helps during negotiations with a dealer.
Let’s say you know that you can afford $400 a month as a lease payment. Will that get you a BMW 6-Series Gran Coupe? If not, what about a nice Buick Regal? Or is it more likely to get you a basic Honda Accord?
Using the Affordability Calculator in our Lease Kit, we find that affordable prices, assuming a 36 month lease and no down payment, would be in the range of $19,600 to $24,400, depending on residual value, which can vary by vehicle make and model. This also assumes no special deals or incentives and that the customer has good credit.
Looking at vehicles in the $19,600 – $24,400 price range, we quickly discover that a $400/month lease is not going to get us a BMW 6-Series or Buick Regal, and might barely get us a Honda Accord. Therefore it would be a waste of our time to try to “talk” a dealer into such a BMW or Buick deal.
Of course, a down payment makes possible a higher priced vehicle. Actually, the effect of a down payment (cap cost reduction) in a lease is more significant than making the same down payment on a car loan. For example, if we made a $2000 down payment, our $400/month payment would get us a car priced in the higher range of $22,500 – $28,100.
A $4000 down payment bumps our affordable vehicle price range up to $25,500 – $31,800 — Buick Regal territory.
For the BMW, we would have to bump up our monthly payment and/or down payment considerably.
Let’s make a table that shows vehicle price ranges for various monthly payment and down payment amounts, again assuming a 36 month lease term and good credit, which affects finance rate (lease money factor).
| Down Payment | |||||
|---|---|---|---|---|---|
| Lease Payment | $0 | $1000 | $2000 | $3000 | $4000 |
| $200 | $9,700-$12,200 | $11,300-$14,000 | $12,700-$15,900 | $14,200-$17,700 | $15,700-$19,600 |
| $300 | $14,700-$18,300 | $16,100-$20,100 | $17,600-$22,000 | $19,100-$23,800 | $20,600-$25,700 |
| $400 | $18,500-$22,600 | $21,000-$26,300 | $22,500-$28,100 | $24,000-$30,000 | $25,500-$31,800 |
| $500 | $24,500-$30,500 | $26,000-$32,400 | $27,400-$34,200 | $29,000-$36,000 | $30,000-$38,000 |
| $600 | $29,300-$36,600 | $30,800-$38,500 | $32,300-$40,300 | $33,800-$42,200 | $35,300-$44,000 |
If you use the Affordability Calculator, you will notice the dramatic effect of credit rating on the price of the car you can expect to lease. That’s why it is so important to know your credit score before going car shopping. Get a Dark Web Scan and your Experian Credit Report for FREE!
The way to lease more expensive cars than those in the above table is to watch for special lease deals from car manufacturers. These are deals in which the car company has discounted the lease price, reduced finance rate (money factor), and boosted residual value — all of which create low monthly payments. In fact, these deals are better than any that could be otherwise negotiated.