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To lease or buy—that was the question
In the market for a new vehicle? If you haven’t been inside a dealership for a few years, you’re in for a surprise. You’ll notice that posters advertising lower-than-low monthly lease rates are decidedly absent.
That’s because credit-market pressures and declining residual values for vehicles have made leasing a much less attractive option than it used to be—for both dealers and consumers. In fact, leasing at some dealerships has all but disappeared.
In 2009, only 100,000 vehicles were leased in Canada—compared with 600,000 just three years earlier.
Historically, leasing was attractive because it allowed you to pay for only a portion of a vehicle. When the lease ended, you had the option of purchasing the vehicle or returning it to the dealer.
Although that’s fundamentally still true, many people are finding that once you factor in the lower residual values (which results in a greater amount to finance over the term), a conventional loan is a better value. What’s more, many automakers are currently offering new-car buyers zero per cent financing over longer terms (some of them up to 84 months), cash rebates, or both.
So should you even consider a lease? Possibly. Tax laws, for instance, allow the expenses of a leased car used for business purposes to be tax deductible. And as before, leasing still offers the advantage of little or no down payment required. However, remember that no equity is built up by leasing, and leasing is often more expensive than buying on credit—especially if you think you might want to buy the car when your lease is up.
Do your homework
The only way to know for sure which option is right for you is to run some numbers and do your homework. Remember:
- Leasing is complicated. Never take the word of the salesman or dealership when negotiating a lease.
- Always be on the lookout for scams. Review the top 10 leasing scams identified by the Auto Leasing Centre (http://www.leasetips.com/leasing_scams.htm) before you make a decision.