First-timers pick financing over leasing

The deal’s quick and painless, and you retain some value, especially in import models

Fried or baked. Plasma or LCD. Boxers or briefs.

Consumers are faced with an array of decisions every day – some of them small and inconsequential, others complex and costly.

For the majority of new-car buyers – those who can’t or won’t pay the entire purchase price in cash – leasing versus financing is often the biggest dilemma they have to face, after picking the actual model.

Finance your purchase and you own the car, although the monthly payments may be steep. Choose leasing and the monthly payments are smaller and more manageable.

But you’re essentially renting; the leasing company owns the vehicle and at the end of the term you have to decide whether to return it or buy it download modern warfare for free.

Auto broker Mark Derry of says consumers sometimes have the best intentions when they lease, saying things like: “`I’m leasing because I have a lot of expenses right now, but I plan to buy it out’.”

“Yet, at lease end, they realize they don’t have the money to buy out their vehicle or finance it. Dropping off the keys and picking up a brand-new model becomes very appealing,” he says.

“Leasing has become a fantastic loyalty program for dealers. They know the date you’re coming back with their car and they can prepare a tempting new offer.”

In fact, leasing may have single-handedly saved the North American car industry by keeping demand for new vehicles strong and assembly lines humming.

It’s an addictive habit that becomes hard for motorists to break.

If they must lease, Derry recommends his clients take a closed lease – one that puts no obligation on the lessee to purchase the vehicle at the end of the agreement – rather than an open lease, which leaves the consumer on the hook for any shortfall in the residual value, what your vehicle is worth on the market at lease end fehler 495 beim herunterladen von apps.

“You might have leased a big SUV three years ago and agreed it will be worth $15,000 in 2007. Instead, gas is a dollar a litre and demand has softened. So your vehicle is now worth $12,000 and you owe the lease company $3,000.”

Manufacturers’ leasing programs are usually closed – they intend to see the vehicles returned so they can be “remarketed” – while third-party leases through specialized companies tend to be open, says Derry.

“Manufacturers are trying to encourage customers to have their leased cars serviced regularly by the dealer,” says Chris Travell, vice-president of Maritz Automotive Research.

“It’s a concerted effort to keep the cars maintained and ready for resale.”

It’s easy to do on the part of the lessee, especially if the lease term coincides with the manufacturer’s warranty hörbücher kostenlos downloaden für handy. However, door dings and scratched paint may get the appraiser’s tongue clucking upon inspection when returning the vehicle.

While it’s true a reconditioning charge can be made to magically disappear when you sit down with the lease manager to discuss your next vehicle, Derry says, the damage has to be paid by someone.

“Return a car with a dent and you’ve reduced your negotiating power by $500. There’s no such thing as a free lunch in the car business.”

Another issue that can trip up the lessee is excessive mileage upon return. The penalty for going over the contract limit is usually punitive. One luxury auto maker charges 18 cents a kilometre, for example.

Be realistic about your annual mileage, says Mohamed Bouchama, executive director of and co-host of CP24’s AutoShop.

“It’s cheaper to buy extra kilometres up front in your lease, rather than get hit with a penalty – at a higher rate per kilometre – at the end of the contract,” he advises gekaufte musik amazonen.

Then there’s the notorious inflexibility of leasing. Changing circumstances, such as the death of a spouse, may saddle the family with a monthly lease expense for a vehicle they can’t even drive.

There’s a variety of “gap insurance” products available on the market – we’ve written about before – although Bouchama warns many of them are restrictive and may not get you out of a bind.

Certainly no insurance will cover you for a change of heart, so if yours is set on leasing a snug sports car or gas-guzzling pickup truck for the next three years, be sure your commitment is enduring.

“People are more educated about leasing than they used to be, but there are still a lot of misinformed consumers around,” says Bouchama weather data. “I have a lot of people crying on the phone.”

While lease disclosures and advertised deals have come a long way, George Iny, president of the Automobile Protection Association, says his researchers never fail to spot misleading dealers’ and manufacturers’ advertising.

Iny says ads will often show an attractive figure, such as $198 per month, in bold print alongside $0 down payment, when in reality the two figures are not related to each other.

“They offer illusions of savings that don’t really exist,” Iny notes. “That $198 per month lease fee is only attainable if you put $2,000 or $3,000 down plus taxes, and that $0 down payment is only available if you agree to $275 up to $350 per month.”

It’s left to the dealer to explain the “misunderstanding” once the customer treks all the way to the showroom. Or the consumer can use a powerful magnifying glass to decipher the mouse print at the bottom of the ad.

“We found a Kia ad with 900 words of fine print – a new record,” laughs Iny windows media center windows 8 kostenlos downloaden.

On the other hand, he notes that General Motors and Toyota have become proficient at advertising leases correctly and helpfully. “They are the gold standard in the industry,” he says.

If leasing is full of pitfalls and caveats, it’s a wonder it still commands about 45 per cent of the new-car market.

But, as our panel of experts says, leasing does make some sense if you’re apt to change vehicles often.

“Leasing to buy is a bad deal, generally,” says Iny. If you intend to keep the vehicle over the long haul, then finance it. There is longer-term financing available – six and seven years – that effectively reduces the monthly payment to an amount that resembles a lease fee of $350 to $450.

With financing, you have the flexibility of selling the vehicle at any time, but don’t be surprised if it’s worth less than what you owe on it herunterladen.

“Many times I hear from people who, halfway through their five years of car payments, decide to sell and learn that they owe $15,000 on a vehicle that will only fetch them $10,000 on the market,” says Bouchama.

Iny suggests this is especially true if you’re buying a domestic vehicle. In that case, you may be better off leasing and returning it, leaving the maker to deal with the steep depreciation. “Depreciation is your biggest expense,” he says. “Especially if you’re shopping for a mid-size domestic sedan or minivan, which have undergone a price collapse.”

The Canadian Black Book, which meticulously tracks vehicle residual values, recently revealed the top five passenger car brands for retained value among four-year-old models: Toyota (57.5 per cent), Honda (52.6), Mazda (45.3) and Acura and Audi (both at 44.4).

The passenger car average was 37.7 per cent. While the domestic figure remains undisclosed, the suspicion is that the Detroit brands retain their value at less than the average Download android 9 images.

Among light trucks and SUVs, all the best retained-value nameplates were Japanese.

Derry points out that thanks to the relatively strong Canadian dollar, American car dealers have curtailed siphoning tractor-trailer loads of used vehicles out of the Canadian market, so that auction prices for off-lease vehicles have softened.

(If you can live without the new-car smell, there are some incredible bargains in the form of three-year-old domestic sedans and minivans.)

Our experts agree that the smart money is on financing your new-car purchase, even if the car companies are working hard to erase “zero per cent” financing from our collective memories.

“Manufacturers are earnestly moving away from zero per cent financing for profitability reasons, though weaning consumers off of it is a tough row to hoe,” says Travell.

Still, there are plenty of 1, 1.9 and 2.9 finance rates advertised, which make the cost of borrowing in the hundreds of dollars, not thousands download illegal software.

The message is resonating with consumers.

Travell notes that among subcompact buyers – a market segment dominated by first-time car shoppers – two-thirds are financing their automobiles rather than leasing.

Among other advantages, there’s no mileage limit to worry about, and the buyer is not answerable for the condition of the vehicle.

As well, there’s no pesky leasing company dictating how much insurance coverage must be bought.

Leasing is more prevalent in the large pickup truck, SUV and luxury vehicle segments, where consumers may be more apt to claim the lease as a business expense.

Overall, the split between new-car leasing and financing hasn’t changed much in the past few years.

Clearly, each acquisition method has found a large and receptive audience in Canada von youtube etwas herunterladen.

Each has its pros and cons, but there’s one rule that applies equally well to both: make an informed decision and stick with it to the end of the lease or loan.

Change your mind in midstream and you’ll likely pay dearly.


Apr 26, 2007


The Toronto Star