Car Leasing Center

It is certainly a question I am getting a lot of these days. As it relates to a great many manufacturer's, leasing may still be available but you are looking at anywhere between 7.9 to 8.0% and of course the residuals are low, so it isn't as advantageous as it use to be.

Right now you are going to see/notice much better incentives and interest rates available for financing.

There was a time when ownership was a huge thing when it came to how a person was going to pay for their vehicle. But the times they are a changing ... ownership when it comes to a vehicle isn't as important as it use to be. People are starting to realise that there are some huge advantages to leasing over buying a car.

Lease Payment - Leasing a Car

The biggest benefit of leasing a car over buying is the monthly payment. When you lease a car you are paying based on the amount (or portion) of car you are driving over a specific period of time, whether it be two, three, four or in some cases, even five years. Yes you do pay the GST and PST however it is based only on the lease payment itself, not the whole price of the car.

That is an important thing to remember, because with a finance your payments are higher because the payment is based on the whole amount of the car, plus the interest, plus ALL the taxes.

The way I like to explain it to people who come to see me is this ...

Makes sense, don't you think? Ok, you might be thinking it's all good in theory ...

BUT ...

Gotta hate the but. Let's break it down another way for you to see first hand what I am talking about.

Let's take a vehicle and compare what you would pay over a 48 month term for both a lease and a finance:

Lease
$325.00 x 48 = $15600

Finance
$510.00 x 48 = $24480

Difference $8880.00

With the lease you have paid $15600 whereas with the finance you have paid out $24480 AND you still have 12 months to go because the typical finance term is 60 months.

Now, some people say ...

"yes, but at the end of the 60 months I own this vehicle."

Which of course is entirely true, with a lease you don't own the vehicle, however, with a finance you don't own it either until you have finished paying it off ... which leads to the next of the benefits of leasing a car ...

Besides the lower monthly payment you have options which provide huge benefits to leasing over buying.

When you lease a car you have the option to either buyout the car at the end of the lease or you can give me back the keys and get into something else.

You basically have an "out." Let's face it, our lifestyles change, our needs change, our tastes change and even cars change. If you lease you are fluid, you can roll with your changes, you aren't locked into the vehicle.

What I have found is that many who go the finance route decide about the fourth year that they are over the vehicle or their needs have changed or another car has caught their eye and they want out. When they go to trade their car they find they are "upside down" meaning they owe more for their car than what it is actually worth. It's a shock to the system and a lot of times they are totally upset and rightly so, they have taken a hit financially which they have to try and recover from.

Leasing means you don't worry about being "upside down." Yup, you don't own the car, but look at the example above, you save $8880.00, which again is better off in your pocket ... don't ya think?

Now, there is one more option that is available through Chrysler, Dodge, Jeep Canada that many people are not aware of, but is a huge PLUS when it comes to the benefits of leasing a car ...

Let's say your car is stolen and damaged beyond repair and your insurance company comes back and says

"your car is worth $25,000 but we are only providing you with $15,000"

Well you and I both know that there is a $10,000 deficit here. With a lease, you aren't on the hook for that deficit, all you are responsible for is your insurance deductible and any outstanding liabilities as it to the car, like a parking or speeding ticket.

If you financed this vehicle instead of leasing it you ARE on the hook personally for the deficit, because you OWN this vehicle.

The thing to REMEMBER is that don't assume that all car manufacturers offer GAP Protection with their leases. You need to ask. As it relates to Chrysler, Dodge, Jeep Canada you do have it for sure.

So ... in a nutshell, the benefits of leasing a car:

1. lower monthly payment
2. pay GST/PST on the payment only
3. options of buying the vehicle or giving it back
4. you have GAP Protection

Some of us want that ownership, whereas, others pretty much are not concerned with the fact if they lease they don't own their vehicle.

Which one is right? It boils down to personal preference and what is important to you, however, now you know why leasing is more beneficial and why more and more of us (Canadian's) are understanding the benefits of leasing a car!

Now that you know the benefits of leasing a car and one huge one is the fact that your lease payment leasing a car is lower.

The reason the lease payment leasing a car is lower than when you finance is because you are only paying on the portion of the car you are driving for a set period of time.

Plus you are only paying GST/PST on the lease payment itself, whereas with a finance your payment is based on the whole car, the interest and the full taxes.

The lease payment leasing a car is lower and that is a huge benefit because it keeps the money where it belongs ... in YOUR pocket!

While the financial savings is a big bonus, there are other benefits of leasing a car that certainly to add to the money savings.

Above we sort of glazed over them in discussing the buying vs leasing a car, earlier. However, the other huge benefit, as far as I am concerned is just as strong as saving money, and that is ...

You have an "OUT"

When I say "out" I am referring to the fact that at the end of a lease term you have the option to:

If you decide that you love this car so much, you certainly can buy it out. Your "buy-back" is the amount of the car that is leftover after the initial term of the lease plus taxes. We'll get into the whole process of what you need to go through when you buyback your car, right now though for the purpose here, you have the option to do it.

The second "OUT"

During your lease, new products have been added to the Chrysler, Dodge, Jeep Canada line-up, needs have changed, lifestyles have changed.

Maybe now you need something bigger or maybe you are downsizing and need something smaller. Regardless, you have the option of giving me back the keys and getting into something new again that is going to meet your needs and fit within your lifestyle.

One thing ... if you decide to give back the keys, set up an appointment with the Car Leasing Center. Have the car inspected to see what damages, if any you are responsible for repairing before you turn the car back.

You betcha!

As long as you know what questions to ask AND you have a sales person who will sit with you and work through ALL your options given the situation.

I am sure you will agree that in addition to the lower lease payment leasing a car, these two "OUTS" certainly make leasing a win/win for YOU!
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Dennise Ryder is the Business Manager at Volvo of Durham. If you have questions visit her Car Leasing Center blog. If you have questions or need some help, send your question via email and she will gladly get back to you
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So, you leased your car, you have enjoyed it for 36 or 48 months and now you are coming to the lease expiry and it's time to think about what you want to do.

Remember you have two options:

1. Buy the car out, or

2. Give back the keys and get another car

Let's focus on buying the car out for a second.

Remember that when you initially leased the car you were told what the residual was - the amount that you would have to pay if you decided to keep this car (before taxes and fees). That amount is guaranteed, meaning you pay it regardless, it isn't open for debate, you can't negotiate that price, that's it end of story.

Now, the key here is knowing if that vehicle you have leased is worth whatever the buyout is. When I ask people what are they planning to do, most say I am going to buyout my car. Some buy it out because they are way over on the kms, or if they have a lot of damage to vehicle.

But ....

Let's hold up for a second. I know that you don't want to pay for km overage or any damages, this is money you are paying out of your pocket for a vehicle that you could send back ... but thinkg a step further from there.

Would you still continue on with the buyout option if you knew that the value of the vehicle in today's market place was well less than the buyout?

I don't think so, what you are doing is paying more for a vehicle than what it is actually worth ... my question to you would be

"Why are you doing that??"

For my leasing clients I do this ...

About six months prior to your lease ending, I call you and make an appointment for you to come in. During that appointment we look at your mileage and take a look at your car to make sure there aren't any damages that you are responsible for.

Six months gives you enough time to budget so that you can fix whatever damages you have instead of waiting til the day of turning your car back in and being dinged.

At this time I ask if you are planning on keeping this vehicle or giving it back and get into something else. If you decide you want to keep it, we already know what the buyout is, the question is did that car hold value?

For example, let's say you got in on some Jeep Liberty lease deals and your buyout is $17000.00 (this is an example only).

I ask the appraiser to take a look at the Jeep Liberty and see what the current value of that vehicle is. If they come back and said the Jeep Liberty is worth today $11000.00, then I would recommend to you to not buy this vehicle out.

If your buyout is $17,000 but the current market value is only $11,000 then why would you pay more for a vehicle than what it is actually worth?

It doesn't make sense.

In this case I would recommend you just give back the keys and get into something else.

I get a lot of "ya buts" after I explain this to a customer and typically the "ya but" is either:

1. I am way over my kms, or

2. I have so many damages and I didn't get the extra damage protection.

First of all in today's market (and today meaning Sep 2008 is when I am writing this), there are enough mfgs incentives that will help offset the kms overages or damages. Plus it is in a dealerships best interest in helping you out where they can as well so that:

1. they move a new car out of inventory, and

2. they get to keep you as a customer

In addition to the mfg incentives, programs and what the dealership incentives are, you will also typically receive an added bonus as a current lease customer. These are referred to as a "Lease Loyalty Bonus." Which is specific only to you as a current lease customer and is obviously designed to give you another incentive for staying.

Now "does it make sense to buyout your vehicle at the end of a lease?"

ONLY IF YOUR VEHICLE HELD VALUE!

Don't buyout your car if the buyout is worth more than the car is actually worth in today's market.

Don't worry if you are over in the kms or have damages

TALK TO YOUR LEASING MANAGER AND GET THEIR OPINION AND SEE WHAT THEY CAN DO TO HELP!

If you have any questions, feel free to leave a post in my
your car auto finance questions answered and I will answer them for you!!

You've done your homework now and have determined that based on your situation, when it comes to buying vs leasing a car it is a greater benefit to you to lease rather than buy.

Excellent!

Let's talk a little bit about what important points you should discuss with your sales rep about car leasing.

A lease is based typically on two hmmm packages per se. You have a low km lease which for the brands I sell is 20,400 kms/year. There is also the high package which is 24,000 kms/year. You can buy extra kms at .08 cents/km (Chrysler) upfront.

Here is what I typically advise when it comes to kms/year:

(a) if you are planning on buying the car out at the end of the lease then go with a low km lease because you don't really care how many kms are on the car,

(b) if you aren't sure what you want to do at the end of the car leasing term, go with the 24,000 kms/year so you have a buffer,

(c) if you think that 24,000 kms/year still isn't enough buy the extra. Whatever you don't use over and above 24,000 kms you will get back, and

(d) as it relates to Chrysler if you find that you are driving more than you initially thought, you can call them and buy your kms as you go and weave them into your payments instead of having a bill at the end of the lease.

Again this is based on your situation. The longest term typically is 48 months, however, again as it relates to Chrysler, there are a few models which offer a 60 month lease. The shortest lease term you can get is 24 months.

Here is what I typically advise when it comes to the lease term:

(a) the rates and residuals differ between terms so I will work out all of them and see which payment is more beneficial,

(b) I tend to recommend either a 24 or 36 month lease, typically because of the residuals and interest. Typically the higher the residual the lower the payment, and

(c) I also tend to recommend the shorter term leases because of the warranties. If you stick with a 24 or 36 month lease you are covered for the entire time of your lease. Whereas if you go 48 months, you should consider topping up the 3 year/60,000 kms bumper to bumper warranty.

You are not obligated to put money down. However, if you are reading advertisements in your local newspaper READ THE FINE PRINT! What happens is that a lease payment is based on freight, fees and taxes due at signing. This isn't money down, these are usually weaved within the lease payment however to make the payment lower, advertising is based on paying these fees upfront.

When it comes to putting money down, here is what I advise:

(a) if the lease payments are worked out and you find that the payment options fit within your budget and you can make it comfortably, then don't put additional money down. Keep it where it belongs, in your pocket. Any additional money you put down you don't get back.

(b) if you want to put a large chunk down on a lease then work out the option of a one time lease payment and see if that works to your benefit, and

(c) if you have read an advertisement that is based on your freight and fees due at signing you have an option here. Let's face it there are people who don't have the $2600 or so to lay down. What you can do is opt again to weave the freight and fees into the payment and with that comes a higher lease payment than what was advertised.

Leasing a car isn't a scary process. I know there are people who have had nothing but trouble with leasing to the point where they refuse to do it again. Unfortunately, that is what happens, however, if you understand the process and know what questions to ask, the process isn't scary and you won't end up getting raked over.

Take the time before you go in to the dealership and think about your driving habits, your budget and what money you have to put down, if any. Write all your questions down so you don't forget and sit down with your sales person and go over each question one at a time.

If you get a sales person who isn't listening or is glazing over a question, ask the question again. This whole process if for you ... NOT HIM OR HER. YOU are the one making the lease payment and need to have a firm understanding of what you are doing. If the sales person isn't answering your questions or if you feel the least bit uncomfortable with them, ask for another.

Take your time, it isn't a race and make sure you feel comfortable with the decision to lease!