Now that you’ve decided it’s time for a new vehicle, should you buy or lease? Well, firstly, what is a lease? A lease is just another type of financing to facilitate a customer’s purchase of their vehicle.
Leasing can be compared to “renting” because the customer only pays for the time the vehicle is used by them and the payments are based on the difference between the sale price and value at the end of the lease. While buying a vehicle does give you an asset, it’s one that can depreciate by up to 30 percent during the first year of ownership. “When you buy, you are using a liquid asset to buy a long-term asset, so you have lost the opportunity to use that money for something else,” says Chartered Accountant Rick Gargarella.
Another important benefit of leasing is that the vehicle is usually covered by warranty for the duration of the lease, eliminating costly repairs. Kia’s “peace of mind” comprehensive warranty is 5 years/100 km, including power train and roadside assistance.
Other Benefits include lower monthly payments, because payments are based on the original price of the vehicle minus the residual or end value. You are really only paying for the usage of the vehicle, whether that is 36, 48 or 60 months. Taxes are added monthly to the lease payment so that no applicable interest is added. For example, a 2017 Kia Soul EX would sell for $22513.00 plus HST. Over 60 months, the payment, on a loan would be $446.00 HST included. On a 48-month lease, you would pay $308.83 HST included with an end value of $11767.00. At the end of the 48 months, you would have the option to keep the vehicle and finance the $11767.00, or bring it back to the dealer and get a new vehicle or give it back to the dealer and walk away from it. Although if the customer wanted to trade their vehicle at the 48 month mark (on a 60 month loan) they would still owe a balance on their loan and may be restricted in trading that vehicle.
So who should buy and who should lease?
“If you have the cash and don’t have to worry about bank financing, you should buy,” advises Gargarella. “You will own the asset and can put a lot of kilometres on it.”
Consider leasing if you don’t have the cash to buy up front but can handle monthly payments. “If you want lower monthly payments, are a low-mileage driver and don’t want to worry about reselling the car, go ahead and lease,” says Chawla.
Lynn Hill, Vice President, Peterborough Kia, 238 Lansdowne St. E.,