Today, most new car dealerships and manufacturers offer payment solutions for every buyer. I get paid once per month and therefore Monthly Payments work best for me. Many buyers get paid twice per month, on the 15th and 30th, so Semi-Monthly Payments make more sense. The majority of people however, get paid every second Friday, and for those buyers, Biweekly Payments are ideal.
Almost all of the individuals and families that I speak to have set a monthly budget and know what they can afford to spend for food, rent/mortgage, clothing, fuel and their car payment(s). They go to the dealership with this number in mind, but aren’t aware of how their monthly budget is converted to a Biweekly Payment.
At LeaseBusters, we convert all payment frequencies to monthly so buyers can stay within their budget and easily compare payments of one vehicle to the next. The majority of people that I speak with don’t know how to do the conversion calculation and think that their Biweekly Payment is simply doubled to convert to the monthly payment. Unfortunately, this doesn’t equate. There are 52 weeks in a year, therefore 26 Biweekly Payments. If you multiply your Biweekly Payment by 26 and divide that number by the 12 months in a year, you have the correct Monthly Payment conversion. For example, if your Biweekly Payment is $200.00 x 26 / 12; your Monthly Payment is $433.33. If your monthly budget is $400.00, you need a Biweekly Payment under $184.62, (e.g. $400 / 26 x 12).
It’s easy to get caught up in the excitement of buying a new car! Many families stretch their monthly budget to get the vehicle that they really want. If the dealer has quoted you a Biweekly Payment, either do the calculation, or if you can’t remember how to do this, ask them to document the monthly equivalent. This way, you won’t be fooled or misinformed.
By: Randy Warren