May 31, 2013
Here’s what you need to know about buying or leasing a car to make a decision that’s right for your financial circumstances.
Know the deal with a lease.
A car lease is a contract that allows you to use a new vehicle for a set amount of time, usually two, three, or four years. At that point, you return it to the dealer, or you can then buy it at a previously set price.
- Look to the future. Is this car a vehicle you envision driving just for the next few years and then trading it in? Or do you see keeping it for years to come, perhaps for a son or daughter to learn to drive in? Only by buying a car will you actually own it outright and be able to pass it down to a family member or sell it down the line. In addition, with a lease, you’ll never reach a point when you’re free of monthly payments.
- Are you on a tight budget? If your monthly budget is telling you that you have limited funds, you might want to consider leasing. Car dealers are usually willing to negotiate a low down payment on a leased car. And because a leasing agreement only requires you to pay off the depreciation on the car (often referred to as “amortization value”) and not its total value, your monthly payments are likely to be lower than if you were to purchase.
- No extra charges. Many lease agreements set limits on annual kilometres. Go beyond the typical 15,000 or so kilometres per year you’re allowed and you’ll wind up having to pay a penalty. Buying a car, on other hand, grants you endless travel.
- Care for wear and tear. If you typically take good care of your car — always remembering to take it in for regular maintenance — a lease could work out well for you. That’s because once a lease expires, you’ll be able to turn in your car, or drive out with a new one, without any additional penalties or issues with trade-in value.
Understanding what’s involved in purchasing or leasing a car is key to making the best decision for you.
*Note: where applicable. Vehicular leasing is not available in all countries.