IS LEASING THE BEST TOOL TO FINANCE YOUR VEHICLE DECISION? Peter Scully, Vehicle Consultant and Owner UBIC Vehicle Solutions Inc.
The best way to approach this decision is to ask yourself these questions; 1) I want ownership of the vehicle as I wish to keep the vehicle for a long period. 2) I wish to “rent” the vehicle paying only for what I use and have a fixed term with no residual (resale) responsibility. Let’s consider this question. You still have the option at the end of a lease to complete ownership and buy the vehicle but this is NOT the approach I would suggest you take. You do have the option at the end of the lease to compare the lease residual with the market value at the time and if there is equity you can purchase the vehicle or find a willing buyer and recover some of the cost of the lease. Works. Unfortunately, there is a weighed cost to the convenience of leasing but believe there is an overall benefit in the lower payment, not having a long ownership cycle or the responsibility of a “Value” when it is time to make a change. Bottom line, a vehicle is not an appreciating asset, it is a depreciating liability and as such should be approached as an expense. Keeping the expense, the vehicle, and the responsibility within your personal tolerances I believe is achieved with leasing, but hey, an opinion. 3) I want to know how much my vehicle really costs? A question many want to know. When you lease a vehicle, you can “fix” your vehicle expense as you know exactly what it will cost in lease payments every month, you can fix your maintenance/fuel costs based on your driving habits, and insurance. As you are not responsible, in a consumer lease, for the residual value of your leased vehicle, your accumulated cost of these items over your use period is “fixed”. When you finance a vehicle all the same expenses come into play BUT you cannot determine what the final vehicle expense is until you end your use period by trading or selling your vehicle. Is this a risk? Of course, especially when the finance terms are increasing in order to keep pace with the ever rising cost of vehicles. The increasing number of “up side down” finance agreements and subsequent deficiency financing compounds this unknown expense. A scary fact dealers work with every day. Does this point you to leasing as a remedy? Certainly think so.
A note; If you do not like the long ownership cycle – lease for 48 months or finance 72 months or longer – you can reduce the lease term. It is cheaper – lower monthly payment – in a lease to shorten the term than in a finance agreement – remember you are only paying the difference between original price and residual value, not the whole purchase price. So if you are considering changing your vehicle more often – without a trade value responsibility – maybe we should consider a shorter lease term? My suggestion when finalizing a finance agreement is to compare the finance payment to a lease payment on the same vehicle. This is certainly not to be construed as selfish on my part – I sell you more cars 🙂 – but a means to keep you in a new vehicle more often with little or no trade value responsibility. Maybe instead of shortening your finance term – a higher payment – you can change your car more often? You can keep your monthly vehicle expense approximately the same over the use of several vehicles, but that is the subject of another discussion. OK? Hope this helps.