Leasing a car should not be a very complicated arrangement when buying a new car but there are some important things that may help you before you sign on the dotted line. Having a great deal of personal experience with leasing cars I’d like to share with you the most important variables to consider. How many kilometres do I really drive? How much am I responsible for paying the day I pick up the car? Do I really need extended warranties?
The majority of drivers who have not leased a car probably do not know off the top of their head how many kilometres they will drive this year. Most manufacturers consider a standard lease around 24,000 km/year. Some offer a low kilometre lease which will give them around 20,000 per year. The lease with the lowest amount of kilometre allowance will result in the lowest payment because used vehicles with lower kms will be worth more at the end than vehicles with higher kms (which allows the leasing company allocate a higher residual on the lease – which causes a lower monthly payment). It was very frustrating selling cars and seeing time and time again the consumer convincing themselves that the low km lease would suit their needs but really the lower payment was taking over their ability to make a reasonable decision. Unless you work very close to your home and do not take many weekend trips, the majority of drivers will need the 24,000 kms allowance standard lease package. Divide how many kms you have on your car now by the amount of time you have owned it and you may be surprised. Low kilometre leases often will have a much larger km penalty if you go over the allowable kms. In the long run you will end up paying more than you would have by just choosing the plan that suits your driving needs.
Its frustrating reading all those newspaper ads claiming you can lease a car for $199 per month when your neighbour has the same car and pays $400. If you truly want a lease with “no money down” there will still be up front costs. On a lease you always pay your first payment the day you pick up your car (unless the manufacturer has an incentive program that “makes” that 1st payment). This means that when you make your final payment you still have one month of driving (lease payments are made in advance of the month as opposed to loans that are paid at the end of the month) . Licensing fees are also due when you pick up your car which can range from $50-$200 depending on what items are included. The best way to get a deal on a new leased car is to ask “what is my monthly payment with tax” and “how much will be required out of pocket the day I pick up my car”. If you are shopping at a few different dealers and get everyone to present the numbers the same way there will be no surprises or misunderstanding.
Extended warranty on a lease.....should I bother? The nice thing about a lease is that you drive a new car with a set payment and often are not concerned with major repairs; you are only responsible for the scheduled maintenance such as oil changes and tire rotations. There are still many manufactures that only cover a bumper to bumper warranty for 3 years or 60, 000 km per year. Most new leases are for 4 years meaning your last year of driving is like rolling the dice. Definitely find out how long you will be covered for and what the extended warranty covers. Often, for $15-$20 per month you can cover yourself for the fourth year without having an unexpected $1500.00 trip to the service department.
Leasing is still the best way in my opinion to drive a new car every 3-4 years. Hopefully the tips I’ve provided you with will make the transaction as easy as possible. |