Should I Buy or Lease My Next Vehicle?

By Dennise Ryder

Ah, that's the $64,000 question!!!

There are a few ways to answer that question and it shouldn't be any surprise that the answers pretty much rest with you, your lifestyle and financial preferences, however, if you stay with me for a couple of minutes I can give you some "food for thought" that could have a bearing on your decision ...

Are ya with me??

Excellent!!!

If you want to modify the vehicle in some way, if you rack up the miles, if you want to own the vehicle and /or if you want to keep your vehicle for several years ... then .... finance.

If you want to keep your monthly payment down (I'll explain that in a second), if you don't put too many kms on in a year, if you want to get into a new vehicle every 2-4 years and/or if you have a business income where you can claim monthly payments for a vehicle ... then .... lease.

Sounds pretty reasonable, right??

Ok, let's go a little further ...

When you decide to finance a vehicle, what you are doing is paying on the full amount of the vehicle plus the tax and interest for the given period or term you have agreed upon, be it 3, 4, 5 or in some cases even 6 years.

When you lease a vehicle you are paying for the amount of the car that you are driving over a period of time. That time can be anywhere from 2-4 years depending on you. You are paying taxes on the monthly payment NOT the entire purchase price. In addition to that at the end of the term you have a couple of choices you can make, you can decide to:

A. buy the vehicle at the end of the term and drive it,
B buy the vehicle at the end of the term and sell it, or
C. give back the keys and get yourself into a new vehicle altogether

Now, I get people who say to me "but if I lease I don't own the vehicle." You are totally correct you don't own the vehicle, however, if you think about it, when you finance you don't own the vehicle either. It isn't "yours" until you have paid it off in full. Here is one more thing to think about ... let's say your family is getting bigger and you now need a bigger car. You still owe on your current car and when you went in to see about using it as a trade you find that you are upside down (you owe more for your car than it is actually worth). With leasing you don't have to worry about being upside down.

One more thing you should know. With a lease you have GAP protection and here is how it works. Let's say you are involved in an accident (heave forbid) and the car is totalled, you insurance company comes back and says the vehicle is valued at $20,000 but your lease at the time is sitting at $25,000. As long as you have met all the requirements with respect to the lease agreement, then you are totally covered. You are not out of pocket. It's the reverse for financing, reason being because "you own" the car. So, in the same scenario, you are responsible for the difference between what your insurance will cover and the value of the car.

Take this a step even further and let's do the math ... Let's see how the numbers work out on a 36 month lease and finance.

Lease Finance
Payment 486.39 x 36 Payment 764.84 x 36
= $17,510.04 = $27,534.00

So we see how the monthly payments break down between and lease and finance. If we look at the difference we can see that if we went the lease route over the 36 months we would have saved ourselves $9648.00 (764.84-486.39x36) that YOU keep in your pocket. In addition with the lease you have three options available, you can:

A. buy the balance owing on the car (residual) and keep the car
B. buy the balance owing on the car and sell it, or
C. give the keys back and get into something new

The decision rests with you in the end, however, models change, tastes change, even our needs change. Leasing certianly offers you much in the way of flexibility and doesn't tie you down.

Dennise Ryder is a Sales Consultant with Toronto Chrysler. Visit her blog At http://www.autotalk.wordpress.com for more information, email her at: dryder@torontododgechrysler.com. Avoid the pitfalls, get the straight talk about buying your next vehicle.

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