Just two decades ago, leasing was a popular option for Canadian residents looking to drive a new car. However, many stung by their previous lease are left wondering whether leasing options are a financially sound way to go. There are many advantages to leasing options, but there are also some unforeseen disadvantages that not all customers understand until the end of the term. The fine print and those additional charges that you don’t think about can come as a big shock when you return your leased car at the end of your term.
Whether or not leasing is a good option for you personally depends on what you want to get out of it. If you want to get a new car but can’t afford the high monthly payments, then leasing might be your only option for driving off a dealership floor with the car of your dreams. What you have to understand, however, is that the car does not belong to you. It’s a lot like renting a car; at the end of your term, you just might end up paying way more than you thought for the pleasure of the ride.
Most economists would say that the rule of deciding to buy versus lease is as simple as asking yourself, how many years you want to drive your car. If you are going to change your car choice every one to four years, then leasing might be your most attractive option. The longer you intend to drive the car you choose, the less attractive a lease may appear on paper.
When you drive a new car off the used cars in Langley BC dealership lot, you have already lost equity — that is just the reality of owning a new automobile. When you lease, however, there is absolutely no equity being built, so losing equity isn’t a concern. What you should be concerned about is how long you want to have the car. When someone purchases a car, they typically own it for about nine to ten years before they opt to replace it. If you are choosing a lease because you can’t afford a new car, but you intend to drive it for a lengthy amount of time, then leasing is about the worst financial choice you can make.
The monthly payments to lease are going to be lower than if you buy the car outright, which is why many people choose to go the lease route. Another advantage is that when you lease a car, you don’t have the hassle of dealing with any mechanical failures or repairs as the car begins to age. At the end of the lease, just as it is about to need service, you have already returned the car and it’s someone else’s problem. Although highly advantageous, that alone doesn’t make leasing a worry-free proposition.
Although leasing a car will cost less than owning it, what most people who choose that option don’t understand is that leasing rates are the highest loan rates that you can take out. It might seem like you are saving money because the payments are so much lower than owning, but you have to consider that in the end, when you turn the car in, you have no investment in the car itself. You are only paying to use it, which is tantamount to throwing money out the window.
When a leased car is returned to the dealership, there is no equity built in the car. You have paid nothing into it but pure interest, and then have nothing to show for it. The average lease is still about $100 a month more just in interest that the car driver is paying, yet they aren’t left with anything in the end. Lessees are helping to pay down the cost of the car for the dealer, not for themselves.
Also, since you don’t own a leased car, there are conditions about how you have to maintain it. When you turn the car in, if there is any additional “wear and tear” found, then the repairs will be at your expense. Sometimes that can equal thousands of additional dollars that you weren’t expecting.
Therefore, before you take out a leasing option for your car, make sure to take into account whether it is right for you personally. Having a nice new car to drive is a very attractive proposition, but paying way more throughout the lease term and being charged at the end to return it to the rightful owner — which isn’t you — can be a hard thing to swallow. Just make sure to weigh all the factors, take all things into consideration and read the fine print before you make the decision to lease a car instead of buying one.