Financing or Leasing – which is best for you?

Whether you finance or lease a vehicle, it is important to understand that regardless of who’s name is on the ownership, the lending institution owns the vehicle until it’s paid for. Don’t believe me? Try not making payments and see how long you “own” your car.

Leasing is simply another way of purchasing a new vehicle. Leasing means that you will make payments on only about half of the vehicle before you reach a “moment of decision” where you decide whether you want to buyout your vehicle, or get into something different. Your payments are most often much smaller than a similar finance term and also you only pay taxes on the payments, not the entire value of the vehicle. In essence, you only pay for what you use.

Finance is what most people are used to doing when they want to own something. Quite simply, they take the total price of an object, add all the tax (of course the government gets their share), and then divide it into payments over the length of term desired. There may or may not be different levels of interest for doing so. This is what most consider a path to car ownership. Long term financing limits your options and you end up paying more overall. Once you go past 3-4 years, you need to start averaging in maintenance costs, such as new brakes and required services which only go up the longer you own the car.

With a lease, you get to choose how long to keep your car, and will be in a better position make decisions sooner. Quite frankly, leasing gives you options, financing gives you obligations. I would rather have more options in today’s fast paced, ever changing world.

Benefits of Leasing:

    • Lower total driving cost – As mentioned above, when considering maintenance, repairs and other factors as the car ages, leasing becomes the lower cost alternative to financing a long term vehicle, especially when factoring in depreciation.
    • You are covered under warranty more frequently – with todays complex vehicles, there is simply more that could go wrong with them, and expensive repairs as well. Although Toyota is generally considered one of the most reliable brands, there still is potential to have the odd mishap from time to time.
    • Newer Technology – call it the “cell phone phenomenon” but most people want the newest technology, especially if it is something that can help save lives. The average person keeps their phone for less than three years. And car technology is also changing at a rapid pace. Just 4 years ago, the Corolla did not have anywhere near the same technology as it has today. The 2017 Corolla LE comes standard with such great tech as Bluetooth, backup camera, auto LED headlamps, the STAR Safety System and Toyota Safety Sense, which includes lane departure alert with steering assist, radar cruise control, auto high beams and a pre-collision system with pedestrian detection.
  • Less chance of negative equity – With today’s technology advances and lifestyle changes happening more frequently, people are finding they NEED to get a different kind of vehicle sooner, rather than later. Unfortunately, long term financing means that usually they will owe more than the market deems the car worth when that moment arrives. Now they are trapped! Leasing actually helps you escape the trap by giving you shorter, more manageable terms and less chance of negative equity. Toyota will even help you in transferring your lease to another person in order to get out early. You never need to be in a lease until the very end of the lease.
  • You do not need to wait until the end – A lease term is simply a method of determining how long you wish to make payments on your vehicle before reaching the moment of decision. However, if at any time, you wish to buyout the vehicle, you can do so. Also, if a situation dictates that you need a different vehicle before the term is up, is usually easier to end a lease early than to try and trade in a long term financed vehicle.

Lease Myths:

  • “I drive too many kilometers to lease” – drivers who drive a lot of kilometers will pay for that mileage whether they lease or finance. Leasing allows for you to customize your kilometer allowance based on your usage and thus lower your buyout. Finance customers only choice is to lose value on their trade in via depreciation and lowered resale value.
  • “There will be wear and tear fees at the end”- Toyota expects a certain level of wear and tear on the use of a vehicle and will only charge if considered excess, such as serious dents, cracked windows, burns, rips or tears to the interior. Finance customers will also pay, just not up front but in the lower resale value of their vehicle, and that is usually more expensive. Also, Toyota does offer WearPass, which helps offset some of the charges that may occur at the end of the lease.
    “There are hidden fees with a lease”- There may have been a time when leasing did have some hidden fees or lease end values guaranteed by the customer instead of by the manufacturer like now. This sometimes lead to very unfortunate surprises at the end of the lease. These days are long gone with all fees clearly spelled out in the lease agreement. Leases fall under the same full disclosure rules as any vehicle purchase. One look at today’s bill of sale will clearly let you know that NOTHING is hidden, either past, present or future.
  • “I’m locked into a lease agreement”- As mentioned above, it is actually easier to get out of a lease early than a finance in most cases. In fact, most people do not keep their leases full term anymore and look to get into a new vehicle within the last 1-2 years of their lease. The majority can easily get into a new vehicle any time in the last year of their lease without much, if any penalty, and is sometimes advantageous for them to do so.

If you wish to discuss leasing a vehicle or are currently in a lease and wish to discuss ending your lease, please contact us!