Deciding between financing or leasing your new car is a head-scratcher every bit as perplexing as selecting a good natural gas contract or a smart cellphone package.

For a small minority of new-car buyers today — about 12 per cent, according to industry watcher Dennis DesRosiers — cash is still king. They can pony up the full purchase price at the time of delivery and drive away with no strings attached ipod music.

For everybody else, it comes down to financing or leasing.

Professional auto broker Mark Derry says consumers who need a new, warrantied car should lease if they’re living on a very tight monthly budget.

“Leasing payments are usually 20 to 35 per cent cheaper per month than financing the same vehicle,” he says, which can be music to the ears of a consumer living from paycheque to paycheque herunterladen.

Derry uses the example of a Toyota Matrix he researched recently for a client. The monthly lease payment was $370 for four years, compared to $482 monthly in borrowing costs for five years (buying it for a total of $28,920).

At first glance, it’s a no-brainer; the lease is more manageable. However, reality sets in at the end of the lease after already spending $17,760 my summer car kostenlos herunterladen. The lessee has to either return the car or agree to buy it at its residual value.

Derry says opting for the buyout often means financing the residual value (what it’s worth on the market), say $10,000, over three more years at 7 or 8 per cent interest. After seven years of car payments, the lessee will finally get to own her car.

If she had chosen to finance her Toyota from the beginning by agreeing to a higher monthly payment (at a favourable rate of 3.9 per cent), she would have paid less interest and owned the car free and clear after five years of equal payments garageband songs herunterladen.

Leasing is enjoying renewed popularity, according to Chris Travell, vice-president of the automotive group of Maritz Research, who tracks the trends for the auto industry. Last year 44 per cent of car shoppers

chose to lease, 10 per cent higher than just a few short years ago.

“Leasing aids a consumer’s cash flow,” says Travell Download youtube video without program on mobile. “Smaller payments are welcome, or they can get more car for the same amount of money.”

Dealers have grown to love leasing again (it fell out of favour in the late 1990s when residuals were often higher than the street value of the vehicles and dealers were swamped with returns), partly because it’s an effective loyalty program.

“He knows the actual date the customer is returning,” says Travell.

Many lessees can’t afford to buy their cars, so they return them and immediately step into a new car and subsequent lease, often at the same dealership datei mit powershell herunterladen.

Pesky charges such as reconditioning fees for small dents and scratches may magically disappear if you sit down to talk about your next car.

`If you’re doing more than 35,000 km per

year, you shouldn’t be leasing’

Mark Derry, auto broker

One charge that won’t disappear is any mileage over the contracted limit. If you travel more than the 20,000-24,000 km per year most leases provide, Derry recommends buying extra kilometres at the time of the lease negotiation minicraft herunterladen.

“Try to be realistic in terms of how much driving you do in a year and buy that amount up front,” he says. “Some manufacturers, such as Chrysler, will rebate you for any unused extra mileage you bought in the contract.

“If you’re doing more than 35,000 km per year, however, you shouldn’t be leasing.”

Also be mindful of the “$0 down” trap herunterladen. In reality, it may not include freight and PDI on the vehicle, licence plates and security deposit.

It could add up to $3,000 needed before driving away — a steep sum for some cash-strapped consumers.

George Iny, president of the Automobile Protection Association, recommends specifying a true zero-down by amortizing all the associated purchase costs over the life of the lease lieder von amazon music herunterladen. It makes it easier to compare apples with apples as you shop.

Iny says there are some good lease deals out there, but consumers have to be vigilant. Advertised monthly lease payments of $139 sound too good to be true — and usually are.

Extra-low payments require a hefty down payment and are front-end loaded with high transportation costs ($1,400 for a small car is excessive, Iny says) and even a mysterious “acquisition fee.”

If you can swing it, financing your purchase is more fiscally prudent, say our experts über useneten.

There’s no mileage limit to worry about, you’re not answerable for the condition of your vehicle and you’re the legal owner from the outset. (In a lease, the leasing company owns your vehicle and can even stipulate how much insurance you must buy — Iny half-jokingly likens lessees to serfs.)

In an attempt to make financing more appealing, many manufacturers are offering longer loan terms of six and seven years to shrink the monthly payments.

“Longer terms are hot right now. It’s become a mortgage for your car,” observes DesRosiers.

In fact, he says, U.S. banks are encouraging buyers to add their car loans to their home mortgage, effectively making their car purchase tax deductible.

No such luck in Canada, but with the average driver keeping a new car 8.2 years, at least the longer loan period makes some sense.

DesRosiers outlines four ways to buy a car, ranked from cheapest to most expensive: pay cash, get a short-term loan (most car loans are open so you can pay it off quicker), arrange a long-term loan (even eight-year car financing is available) and, at the most expensive end, negotiate a lease.

“Think of it this way: you would need two leases, one after the other, to reach the eight-year mark” — and pay off the car before you sell it — “which your neighbour could achieve with one five-year car loan.”

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Apr. 27, 2006

MARK TOLJAGIC