2- Shopping Based on Monthly Payments Alone

You can save a lot over the long term if you have enough money to buy your used car outright. If you don’t fall into this category, you’ll have to make up a budget and determine how much you can afford.

When people look for a new car, they often think about the monthly payments they’ll have to make. While a lower monthly payment is good for your monthly budget, a longer payment period means you end up paying back more money in the long run. Due to compounding interest, it could make more sense for you to take on a higher monthly payment since it’s possible to pay back the principle in a shorter period.

A cheaper way to get yourself into a used car is to lease one. And yes, you can lease a used car. But not all dealerships offer used car leases and there are certain conditions. According to Edmunds, it must be certified pre-owned. The mileage must be under 48,000 miles and the vehicle must be less than four years old.1

But remember, while your monthly lease payments can be lower than your monthly loan payments, you may have to return a leased car at the end of your lease. If you bought your used car, you can sell it or trade it in at your discretion. One bonus is that the residual value at the end of the lease for your used car will be much more affordable than a new car, making it more attractive to purchase at the end.