auto IQ
Buy , Lease or Finance ? How to determine which option is right for you
In Canada , there are three ways to buy a new vehicle : Pay in full upfront , finance it with a loan or lease it through monthly payments . With pros and cons to each , which is best for you ?
Rich Pentney , sales manager at Murray Chevrolet Cadillac Buick GMC in Brandon , says the choice is evenly split for more affordable cars , with probably one-third of buyers at his dealership choosing each option . But , he adds , more expensive cars tend to be leased — nearly three of every four Cadillac buyers prefer leasing . And that proportion can be as high as 90
By Mark rIChardson
percent for other premium brands .
Leasing is often the better choice for people who buy a premium car as they ’ re more likely to trade it in sooner , usually after just a year or two . “ They want to have the latest and greatest ,” Pentney says .
It ’ s also the cheapest choice , monthto-month , for any car . Leasing is cost-effective since you don ’ t pay for the car — just the time you have it . But it comes with one big drawback : You ’ ll never actually own the vehicle while you lease it , and at the end of the contract , you must either pay a predetermined rate to buy it , or just hand it back and walk away with nothing .
So , while you won ’ t take a hit on the depreciation that new vehicles experience in the first few years and you ’ ll experience minimal repair expenses , you ’ ll always be making a monthly payment if you choose to continue leasing a new car .
Financing , on the other hand , will have larger monthly payments because you ’ re paying to own the vehicle outright over the period of the loan . The longer the length of your loan , the less you have to pay each month because the payments are stretched out over a greater time . It ’ s not uncommon now to get a loan for seven or eight years .
Even at low interest , however , such long terms can bog you down in debt . Some drivers will be tempted to buy a pricier vehicle than they can really afford by extending their payments for two or three more years . Plus , a longer loan might mean you ’ ll be paying for the car after its warranty has expired , which means you ’ ll be paying for maintenance costs at the same time . Many financial advisors recommend no more than three years for the average Manitoban .
What about paying for a vehicle outright with cash ? If you ’ ve got the money in the bank — go for it ! But with today ’ s low interest rates and the depreciation rates of new cars , leasing and financing often make more financial sense . “ In my dad ’ s generation , families paid outright for cars . Cash was king ,” Pentney says . “ Somewhere in the last five years , we took a U-turn and now financing and leasing are kings .”
Whichever option you choose , buckle up and enjoy the ride !
djiledesign / isTOCK |
Pros and Cons
The good and bad about car-buying options
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BUy oUtrIGht
Pros : no interest payments ; you own the car ’ s equity
Cons : You need the cash in the bank to start ; you could save more if you invest the money in a savings account
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FInanCe
Pros : You own the car at the end of payments ; no annual mileage limits
Cons : You pay for the entire car ( including tax ), meaning higher payments
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Lease
Pros : Cheaper monthly payments ; simpler trade-in
Cons : You don ’ t own the car , just the use of it
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cAA MANITOBA SprINg 2018 27 |