Should I Buy Or Lease My Next Vehicle?
Ah, that’s the $64,000 question!!!
There are a few ways to answer that question and it shouldn’t be any surprise that the
answers pretty much rest with you, your lifestyle and financial preferences, however,
if you stay with me for a couple of minutes I can give you some “food for thought”
that could have a bearing on your decision …
Are ya with me??
Excellent!!!
If you want to modify the vehicle in some way, if you rack up the miles, if you want to own
the vehicle and /or if you want to keep your vehicle for several years … then …. finance.
If you want to keep your monthly payment down (I’ll explain that in a second), if you don’t
put too many kms on in a year, if you want to get into a new vehicle every 2-4 years and/or
if you have a business income where you can claim monthly payments for a vehicle …
then …. lease.
Sounds pretty reasonable, right??
Ok, let’s go a little further …
When you decide to finance a vehicle, what you are doing is paying on the full amount of
the vehicle plus the tax and interest for the given period or term you have agreed upon,
be it 3, 4, 5 or in some cases even 6 years.
When you lease a vehicle you are paying for the amount of the car that you are driving
over a period of time. That time can be anywhere from 2-4 years depending on you. You
are paying taxes on the monthly payment NOT the entire purchase price. In addition to
that at the end of the term you have a couple of choices you can make, you can decide
to:
A. buy the vehicle at the end of the term and drive it,
B buy the vehicle at the end of the term and sell it, or
C. give back the keys and get yourself into a new vehicle altogether
Now, I get people who say to me “but if I lease I don’t own the vehicle.” You are totally
correct you don’t own the vehicle, however, if you think about it, when you finance you
don’t own the vehicle either. It isn’t “yours” until you have paid it off in full. Here is one
more thing to think about … let’s say your family is getting bigger and you now need a
bigger car. You still owe on your current car and when you went in to see about using
it as a trade you find that you are upside down (you owe more for your car than it is
actually worth). With leasing you don’t have to worry about being upside down.
One more thing you should know. With a lease you have GAP protection and here is
how it works. Let’s say you are involved in an accident (heave forbid) and the car
is totalled, you insurance company comes back and says the vehicle is valued at
$20,000 but your lease at the time is sitting at $25,000. As long as you have
met all the requirements with respect to the lease agreement, then you are totally
covered. You are not out of pocket. It’s the reverse for financing, reason being
because “you own” the car. So, in the same scenario, you are responsible for the
difference between what your insurance will cover and the value of the car.
Take this a step even further and let’s do the math … Let’s see how the numbers work
out on a 36 month lease and finance.
Lease Finance
Payment 486.39 x 36 Payment 764.84 x 36
= $17510.04 = $27534.00
So we see how the monthly payments break down between and lease and finance. If we
look at the difference we can see that if we went the lease route over the 36 months
we would have saved ourselves $9648.00 (764.84-486.39×36) that YOU keep in your
pocket. In addition with the lease you have three options available, you can:
A. buy the balance owing on the car (residual) and keep the car
B. buy the balance owing on the car and sell it, or
C. give the keys back and get into something new
The decision rests with you in the end, however, models change, tastes change, even
our needs change. Leasing certianly offers you much in the way of flexibility and
doesn’t tie you down.
Dennise Ryder is a Sales Consultant with Toronto Chrysler. Visit her blog
At http://www.autotalk.wordpress.com for more information, email her at:
dryder@torontododgechrysler.com. Avoid the pitfalls, get the straight
talk about buying your next vehicle.
Tags: auto finance, auto lease, buying, car finance, car leasing, leasing
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