Welcome To The Auto leasing Blog: 7월 2010

Things to Keep In Mind Whether You Lease or Buy

1.Whether you lease or buy, you need to insure your vehicle.
In addition to insuring the vehicle, you must make sure that you have the amount of coverage required by your lease.

2.Whether you lease or buy, you are responsible for licensing and registering your vehicle.You are responsible for playing the license and vehicle registration fees during the term of the lease, just as if you bought the vehicle.

3.Whether you lease or buy, you are responsible for maintaining your vehicle.You are responsible for maintaining the vehicle according to the maintenance schedule set out in Owner’s Manual.

4.Whether you lease or buy, you are protected.
There is a Canadian Motor Vehicle Arbitration Plan (CAMVAP) which is a free program available to you from participating manufacturer and leasing companies.

These are some key things you need to keep in mind whether you lease your vehicle or purchase your vehicle.

The Language of Auto Leasing

Auto leasing programs are simply modified version of business leases and that explains why there are so many confusing vocabularies in auto leasing today. Understanding these somewhat complicated terminologies can help you through confusing process. Here are some leasing terms with their definitions.

Acquisition Fee:
This fee covers the cost of preparing and servicing your lease.

Amount to be amortized:
This is the difference between the Net Leased Vehicle Amount and the Residual Value which represents the Depreciation that you pay over the term of your lease.
For example:
This is calculated as follows:
Net Leased Vehicle Amount $ 50,000
- Residual Value $-28,000
= Amount to be Amortized $ 22,000

Annual Percentage Rate:
The Total Lease Charges expressed as an annual rate.

Depreciation:
This is the loss in the vehicle’s value that occurs over time. The more you drive it, and the longer you keep the vehicle, the more the vehicle will depreciate.

Excess Kilometer Charge:
The additional cost if you drive your vehicle more kilometers than the maximum stated on your lease.

Leased Vehicle Amount:
This is the amount you and the leasing company agree on for the vehicle.

Residual Value:
This is one of the most important leasing terms and it is the estimated wholesale value of the vehicle at the end of your lease which means that the higher the residual value, the lower your monthly payments.

Early Termination:
This means you want to get out of the lease contract before all your payments have been made. For instance, if you are sick of driving the same car or you cannot simply afford it, you decided to terminate the lease. However, just like the home mortgage, you must pay a penalty to the leasing company. If you want to avoid this penalty, you might try finding someone to take your lease over.

Buyout Amount:
At the end of your lease contract, you can buyout your leased vehicle if you want to and buyout amount is the amount of money you have to pay to own the car.

As I mentioned above, knowing this leasing terminologies will significantly help you when you decided to lease your future vehicle.

Should I Lease or Buy?

It seems that it is a common dilemma for many automobile customers who are comparing purchasing options. Is lease better option? It depends on each individual. Simply say, leases and purchase finances (loans) are two different ways of automobile financing. Lease is financing the use of a vehicle and a loan is financing the purchase of a vehicle. Each method has its own advantages and disadvantages. The important point here is that it is almost impossible to conclude that one is better than the other for sure because it depends on your own situation and preferences. What you need to do first is to decide what is important to you. Here are some questions that you may want to take some time to think of. Is having a new vehicle every 2 or 3 years with no hassle for major repairs more important than long term cost? Are long term cost saving more important than lower monthly payments? Is ownership more important than low up-front costs and no down payment?

Buying and leasing are different

When you buy, you pay for the entire cost of a vehicle; regardless of how many kilometers you drive it. On the other hand, you only pay for a portion of a vehicle’s cost, which is the part that you use up during the time you are driving it. For example, if you lease a vehicle that costs $30,000, but is worth only $23,000 after 2 years, you pay for the $7,000 difference (it is called depreciation), plus finance charges, plus fees during the term of the lease. When you buy, however, you pay the entire $30,000, plus finance charges, plus fees. This basically explains how leasing offers remarkably lower monthly payments than buying.

So, which is better, lease or buy?

As I mentioned earlier, it depends on what is most important to you. If you prefer lower monthly payments and like a driving a new vehicle, that’s always under warranty period, every 2 or 3 years, but are willing to pay a little more over the long haul to get those benefits, then lease is the way for you.

If you prefer to pay off your vehicle, do not worry about payments, and drive it for as long as you want, but are willing to have higher initial monthly payments and maintenance costs, but lower long-term costs, then you should buy.

For those who are still making decisions, it might help you decide whether to buy or lease. From the article written by Jessica Anderson, I found this statement very compelling "Leasing still makes sense if you trade in every few years and always have a car payment." (Anderson, 2009).

The chart below is the comparison of a typical lease compared to a 0% loan and a typical loan. I have to warn you though, because it does not necessarily mean that leasing is always better. Monthly payments are not the only factor that you should consider.

Why Leasing? Why Is Leasing Popular?

If we go back to about 10 years ago, most automobile consumers were not aware of what auto leasing is. Now, nearly 40% of all new automobiles are leased in Canada and the numbers are increasing rapidly each year. If you wish to know how popular leasing has become, you can just take a look at lease ads in newspapers.

There are two main factors that caused the favourable shift to leasing. Firstly, the cost of new cars has increased significantly over last few years and that high cost of new cars put out potential average buyers. Secondly, in the late 1980’s, tax law changed and it eliminated interest deductions on automobile loans and that lead increased the cost of ownership experience. Thus, people were eager to find ways to make their personal vehicles more reachable.

Leasing has become incredibly popular because it gives an opportunity for people to drive the vehicles they want or vehicles that they dreamt of for less money and less hassle. However, as attractive as it may seem, leasing certainly does not fit everybody’s lifestyle. Moreover, leases can be more complicated than purchase loans. From the article written by Eric Peters, he puts it this way, “The problem with leasing isn’t so much the cost; rather, it’s the perceived complexity” (Peters, 1996). In order to get a good fair deal on your auto leasing, you must do your research and preparation.

What Is Auto Leasing?

Although automotive leasing became a very popular method for Canadians to own a vehicle, it is true that many consumers get confused when it comes to leasing a vehicle. So, let’s find out what automotive leasing is about.

The idea of auto leasing is quite simple but many customers do not completely get the idea of it. Even some experts have misconceptions about leasing and give customers wrong impression about leasing. Auto leasing may seem relatively new to automobile customers but leasing, in fact, has long been used in the business sector as a way of financing equipments, buildings, and vehicles. Unfortunately, auto leasing is fairly new to customers and they are still learning about leasing. There have been scams in which their lack of knowledge has been taken advantage of. There are some customers who are leasing vehicles and are not even aware of their unfair leasing contracts. According to Ashly Knapp, head analyst at Auto Advisor which is a Seattle-based nationwide service that arranges auto leases and purchases, “Many people find that leasing has all the negatives of ownership and none of the positives” (Geschwind, 1993). However, do not be afraid of leasing because you will be fully knowledgeable of auto leasing after reading my posts. I am going to give you some valuable information that you need to know about leasing and it will help you when you lease a vehicle in the future. As long as you understand how auto leasing works, you will be able to take advantages of leasing and you may never finance a vehicle again. Here is a simple explanation of auto leasing; it is one of the methods of acquiring a vehicle for a fixed period of time.