For some people, a vehicle is a personal asset that can help you get to and from work, take you to errands, and give you the personal freedom to explore new places. For others, a vehicle is even more important. They purchase a semi-truck or trailer, or other commercial vehicles to start a business and generate revenue.
When you seek to acquire a vehicle, you’ll need to decide whether you want to lease it or purchase it (and own it henceforth). But which is the superior option?
Leasing vs. Owning
In case you aren’t familiar, purchasing and leasing are two different ways to gain access to a vehicle. In purchasing, you’ll pay a set amount of money for a vehicle; from that point forward, you’ll own it outright. You may borrow money to come up with the full funds, but the vehicle will be yours—and you’ll have the authority to use it how you like.
Leasing is an option available primarily for people who can’t (or don’t want to) make purchases. You’ll sign a lease agreement with the owner of the vehicle, then pay a flat monthly fee to continue using it. There may be rules and regulations for how you use the vehicle, but the owner will take responsibility for routine maintenance and certain types of issues. Typically, leases are long-term agreements, lasting in intervals of years.
The Perks of Ownership
Buying and owning a vehicle can be highly advantageous:
- Full ownership (and equity). Owning a vehicle allows you to build equity in it. If you take out a loan, your monthly payments will gradually pay off the principal you’ve borrowed. In other words, you’ll have a financial stake in the vehicle. This can add to your net worth over time (or right away if you purchase the vehicle in full).
- Freedom and flexibility. Owning the vehicle also means you won’t have to obey the rules and stipulations set by a lease; you’ll have the full freedom and flexibility to do anything you want with it. You can customize the vehicle to your liking, drive it as many miles as you want, and use it for practically any purpose.
- Less worry about wear and tear. In many lease agreements, the lessee will be responsible for taking care of many types of damage sustained to the vehicle, including basic wear and tear. If you own the vehicle, you won’t have to worry about it.
- Resale potential. In the future, if you decide you no longer want the vehicle or if you’re ready for a new purchase, you can sell the vehicle or trade it in—but only if you own it. This can help you recapture some of the costs of the vehicle.
The Perks of Leasing
However, there are also some benefits to leasing:
- Lower upfront costs. In a lease, you’ll usually have to pay something upfront—but the upfront costs of a lease are much lower. This is ideal if you’re dealing with limited cash.
- Lower monthly costs. In general, the monthly costs of a lease are lower than the monthly costs of ownership (assuming you take out a loan). This is because you won’t deal with extra costs, like interest.
- Fewer responsibilities. In a lease, you may not have to take responsibility for the vehicle’s ongoing maintenance; this care may be included in your agreement, as a responsibility of the owner.
- Future flexibility (sometimes). Some types of lease agreements afford you flexibility. At the end of the lease, you can renew the lease for another term, end the lease, or even transition to ownership.
Priorities to Consider
Buying isn’t strictly better than leasing, and vice versa. So how can you decide which is best for you?
- Ownership duration. Think about how long you’re going to own this vehicle. Is this a long-term or short-term investment?
- Need for customizability. How much do you want to customize the vehicle to your liking?
- Need for flexibility. How much flexibility do you need? For example, how many miles are you planning on driving, and would a lease agreement get in your way?
- Access to cash. How much cash do you have on hand, and how easily can you qualify for a loan?
- Monthly budget. What is your monthly budget for a vehicle? Would a lease or ownership arrangement be more favorable to your financial needs?
- Preferences for repairs and maintenance. How are you going to handle repairs and maintenance to the vehicle?
Buying and leasing are both viable options for vehicles, regardless of whether you want a personal vehicle or a commercial one. However, one will likely favor you and your situation better than the other. Consider your options carefully before making the final decision.
How Conventional Scores Are Stopping Most Millennials From Accessing Credit and How One Company Is Changing That
Credit scores are a barrier to entry for just about everything for millennials. Trust Science® is taking new metrics into account to expand access to credit with Credit Bureau 2.0®
What’s Keeping Millennials From Accessing Credit?
The concept behind a credit score seems simple enough. It tracks your credit history to see if you’re someone that a bank or lender can trust to pay back a loan. However, conventional credit scores just don’t account for the way that millennials and Gen Z handle their finances.
Even where a person would be fully capable and reliable in paying back a loan, the lack of an established credit score can prevent them from accessing credit, or at least from getting as much as they should be able to. That leaves millennials without an on-ramp into the modern economy and it can also jeopardize access to other “credit gated” necessities like housing.
The way that conventional credit scores are calculated is complex but boils down to 5 essential metrics:
- Payment history
- Amount owed
- Length of credit history
- Credit mix
- Hard credit inquiries
You can start to see the issue for millennials when you look at what data goes into their credit scores. For one thing, younger people don’t have a long credit history. Even without other factors, simply being young and only having had so much time to build credit puts them at a disadvantage. However, millennials have also been tending to establish credit later in life compared with previous generations, putting them at a further disadvantage.
The most significant issue here is the credit mix. Different types of credit affect credit scores differently, and millennials generally don’t have a favorable mix. While they might have a credit card or two, they generally don’t have mortgages. These are the most beneficial type of credit to have on your credit report, and millennials really have that going against them.
The student loan crisis also plays a big role. Young people today have much higher student loan debts than previous generations, meaning they have a great amount of credit owed. Not only that, but many can begin to fall behind on payments and see that amount grow. This can quickly send a credit score spiraling out of control.
Student loans aren’t the only threat. When young, some people make poor decisions. They could find themselves making credit mistakes very early on and suffering the fact that those mistakes can haunt their score for seven years in general. That means someone at 25 is still paying for a mistake made at the age of 18, even if they’ve been on the up and up ever since.
It’s clear that conventional credit scores weren’t designed with the current landscape in mind and that young people are being negatively affected. But what exactly can be done about this? One company is changing the way that lenders look at creditworthiness to make it possible for millennials to mitigate these issues.
How Credit Bureau 2.0 Fixes Those Problems
Trust Science is an innovative fintech company that has developed Credit Bureau 2.0, a scoring service that acts as an antidote for lenders, offsetting the problems posed by conventional credit scores. Instead of seeing a lack of credit history, a few negative issues from years ago, or a poor credit mix and ending any credit application, Credit Bureau 2.0 considers a wealth of additional data to generate a more accurate credit score.
Credit Bureau 2.0 expands the data used to calculate credit scores, getting the borrower’s consented, permissioned data and/or acquiring Alternative Data in order to reach a more accurate credit score. For example, those applying for credit can use Trust Science’s Smart Consent™ app to divulge their information safely and confidently to Trust Science, which is working on behalf of the lender that is trying to reach a decision about the borrower. By doing so, young people or other people without a credit history in-country can let prudent financial decisions in other areas of their lives demonstrate that they’re trustworthy for greater credit.
The service is available to a wide variety of lenders, including auto lenders, installment lenders, and single-repayment lenders. It’s in their best interest to find more reliable, deserving borrowers to give loans to, so Credit Bureau 2.0 benefits both sides of the transaction.
Trust Science CEO Evan Chrapko says that “Credit Bureau 2.0 isn’t just about giving borrowers access to more credit than they would have had otherwise. It’s about recontextualizing financial data to give both sides–lenders and borrowers–a more accurate and reliable way to enter into loans in the modern economy.”
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