Lease or Buy a Car – Which is for YOU?
This is a question that for awhile has been something you haven’t had to think about because manufacturer’s weren’t offering much in the way of lease option, however, things are a changing. It is now a question that is slowly entering it’s way back and I, for one, am happy to see that the option to lease a car is coming back!
We will be going over the advantages and disadvantages of car leasing over buying in posts to come. For now, however, what I want you to do is consider the following points because these points will help you determine which is more beneficial to you, even before you step onto a showroom floor.
I am writing this post because I’ve had people at my desk who are in a lease who realize that leasing wasn’t the best option for them, but at the time they signed their bill of sale it seemed pretty viable. Don’t get me wrong, leasing IS viable BUT a lease option will not work for everyone. So, consider these points and avoid some of the pitfalls that others before you have fallen into …
Lease or Buy a Car – Points to Think About
Do you drive?
A. Less than 20,000 kms/year
B. More than 20,000 but less than 25,000 kms/year
C. Well over 25,000 kms/year
There are two options typically that are available when it comes to leasing a car, although each manufacturer may vary slightly. The point is that if you do OVER the kms you are on the hook. When you lease a vehicle for 48 months with 20,000 kms/year your vehicle is expected to have 80,000 kms (actually the 80,000 + kms that were on at the time you drove off) when it comes back. If it comes back with 91,000 kms then you will be paying anywhere from .12 to .20 cents/km PLUS tax on the overage.
This is where people really get themselves into a jam because they don’t take their driving habits into account. When I ask people, for example, 25,000 kms/year does that work for you is it enough? Many times people say, well no, I actually do 28,000/year but if I take the Go Train one day a week, use my bike in the summer, then I am good to go. Don’t do that to yourself. If you even THINK you may do more than 25,000/year protect yourself and buy your kms upfront. At the end of your lease if you have done less than the extra mileage you paid for it will come back to you. I can’t say that about all the manufacturer’s, however, that’s how Ford rolls.
Does owning your car matter to you?
A. No, it’s not that important to me
B. Yes, I want to keep my car and drive it into the ground
The key thing to remember is that if you lease a car, you do not own it, the manufacturer does. So, having said that, if owning is important and/or you drive your cars into the ground, then buying your car is going to be the way for you to go. If, however, “ownership” isn’t that important for you, then depending on how many kms/year you drive and how you answer the other questions, leasing could be a viable option.
Do you like the idea of getting into a new car every 36/48 months?
A. Yes, I want to be able to get into a newer model every few years
B. No, it’s not all that important to me
Your needs will change as does a Manufacturer’s models with updates every few years. If you want to be able to cycle into a new model vehicle then of course leasing is going to give you the best option for that. Keep in mind that there is an option for a shorter term of 24 months and a longer term, in some cases, of a 60 month lease. Which is better depends on, of course, your budget, however, DO NOT lease for 60 months. If you are going to lease for 60 months then you are better off to finance it, at least at the end of a five year finance you have a vehicle that you use as a trade and get a tax benefit out of it.
Do you own a business and want to be able to get a vehicle through your company?
A. Yes, I put all my vehicles through my company
B. No, I don’t own a company
If you aren’t a business owner then this won’t affect you much, however, if you own a business then of course you can write-off your lease/finance payments. Regardless, ALWAYS double check with your Accountant, they will be better suited to advise you as to which option will be more advantageous for your business.
These questions are meant to determine if you should lease or buy a car. The main area where people end up in a bind is when it comes to the amount of kms/year. I see so many people who have gone way over because they didn’t quite understand how the kms/year works and their sales person didn’t explain it clearly enough. If the leasing option isn’t totally clear, or you have that little feeling in your stomach, you know the one, don’t hesitate to ask either the Sales Manager and/or the Business Manager to go over the options with you again and before you sign anything. They will be more than happy to sit with you and go over the aspects of a lease with you.
What sorts of experiences have you had when you’re deciding if you should lease or buy a car? If you mention them through the comments below, you are helping someone else.