Leasing

Leasing vs. Financing – What’s best for you?

You’re ready to buy a new car. You’ve got the make and model picked out, you’ve taken a test drive and now it’s down to the financial details. Should you lease or finance? Ask yourself the following five questions to help make the decision that’s right for you.

1. How much do you plan to drive your new vehicle?

Leasing can make good sense, whether you’re planning to commute to work in your car every day, or to split your commuting between driving and public transit. That’s because a typical lease agreement offers programs for low, high and average (24,000) kilometre/year drivers. Many dealerships can tailor your lease agreement to your specific needs via the purchase of more mileage leeway up front or by allowing payment reduction in exchange for fewer included kilometres within your lease agreement.

2. Is it important to you to own your car?

If you want to make alterations or customizations to your new vehicle, or if you plan to keep your vehicle for longer than 5 years, financing may be a better option for you. Keep in mind that leasing a vehicle is really about time and usage – both of which are unique to your circumstances – while financing for ownership is about a plan to build some equity over a longer time horizon. Whichever option you choose, it is important to select a vehicle that will retain its value over time.

3. What is a manageable monthly payment for you?

Leasing payments may be smaller than financing payments as the entire value of the vehicle is not on your shoulders. You only pay the difference between what the new vehicle is worth today and what it will be worth at the end of your leasing term – typically 36 to 48 months. This is referred to as the depreciation rate, or residual value. Keep in mind that taxes, administration fees and interest are also added to the cost.

For example, let’s say you are looking to drive home a new vehicle at a price of $14,000. If the estimated resale value of that vehicle after 36 months is $6,500 (the residual value), then over the span of your lease, you will pay only $7,500 (the depreciation), plus taxes, administration fees, etc.

 4. Do you prefer to drive a new car?

One of the most popular features of leasing is the opportunity to upgrade your vehicle when you reach the end of your leasing term. This keeps maintenance costs down, involves less hassle dealing with repairs, and takes advantage of our great warrantees.

5. Do you want to lease a new car or buy out your lease at the end of your lease period?


There are two choices available to you at the end of your lease – the first is to return your leased car and purchase a new one. Start by contacting your dealer to return your car and begin the selection process for your new ride. You should be aware of any excess wear and tear and tend to any necessary repairs to avoid excess wear charges. You may find it helpful to review this chart, which clarifies what type of wear is considered “excess wear.” If applicable, and with the help of your dealer, you will also be required to calculate the exceeded mileage costs (these are detailed on your lease agreement and usually range from 10-18 cents per extra km). Once all this is complete, you can focus on picking out your next great vehicle.


If you buy out your lease you’ll have to pay the agreed upon buy-out price on your contract, or set up a financing plan with your dealer for the remainder of the vehicle’s cost. This is a good plan if the vehicle still meets your needs, and it can remove any worry about extra mileage or excess wear costs.

Just like the vehicle selection process, choosing the payment option that works best for you requires research and planning. Be aware of the fine print and don’t be afraid to ask – getting the best deal possible might require some digging. Ask your dealer about any added incentives or additional discounts available for each of your options. Approach this decision like any long-term agreement; arm yourself with the required knowledge to ensure you are making the best choice, both for today and the road ahead.

 

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