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Dave's Take on Leasing


There are numerous ways to get in to a new car.

You can pay cash (lucky you!), finance with a down payment, finance with zero down or lease.

As all consumers live with there own set of unique circumstances all consumers should consider these various methods seriously.

Today let's consider leasing and what the advantages might be.

To begin let's review what a lease is. A lease is a contract whereby you agree to make payments to Nissan Finance over a set term. When the term is up you have a choice to either bring the car back to Nissan or, if you choose, purchase the vehicle at an agreed price. This price is called the 'residual'.

Your payments are based on the difference between the sale price and the residual. As an example, consider a $30,000 sale price car with a $15,000 residual (this is just an example - residuals are based on various models and lease terms). Your payments would be based on the $15,000 instead of the $30,000.

In some cases this may result in a lower payment to you.

You can have the lease contract for 24 months, 36 months, 39 months, 48 months, 60 months and even 64 months. With no down payment the longer lease will usually have the lower payment.

You are also able to choose (within reason) the kilometres per year you are allowed to put on the vehicle without a penalty. Most leases are for 20,000 per year or 24,000 per year but we can customize them with other allowances as well. This does not mean that every year you need to keep under that amount but it is based on a total. A 3 year 24,000 K lease means you have 72,000 over the entire three year period.

As a lessee you are still required to maintain the vehicle. You still pay for oil changes and regular service on the car. You would also be responsible for your own snow tires and rims. You are also expected to keep the vehicle in a reasonable state of upkeep. Regular wear and tear is OK but burnt seats or dents in a fender are on your dime. A very reasonably priced 'Lease End Protection Plan' is available (and highly recommended) to cover a great deal of these possible mishaps.

Why consider a lease? Well, if you like to change vehicles every so often a lease might be right up your alley. With a long term loan you may find that when you go to trade your car in on a new one you owe more than your car is worth. This is called 'negative equity' and can hinder your ability to get that new car. Or you could add that negative equity to your new loan but that problem may just get compounded over time.

Consider the following - you have two kids, 7 and 4 years old. The vehicle you choose today might be perfect for your young family. Now, let's fast forward four years - you now have an 11 year old (in hockey) and an 8 year old (taking guitar lessons) and - oh joy! - a 3 year old as well.

Your family grew but your car did not. Do you want to trade in a car with three years still owing on your 7 year loan? You might find you are better positioned with a lease. Much easier to bring in your present vehicle when your 4 year lease is up and get in to a bigger car (SUV?) with no worries.

Another advantage to leasing? You don't have to borrow money to pay the government the 13% tax. On a $30,000 car this is an extra $3,900 you need to borrow - yikes!

With a lease the tax is simply added to the monthly payment. Much nicer - oh how I love deferred tax.

Like most things in life there may be disadvantages as well as advantages to leasing. As stated earlier we are all in unique situations.

I strongly recommend you contact me - Dave Johnson, Belleville Nissan, 613-962-7100 - and we can arrange a convenient time to see what might best work for you.

We will be happy to show you numbers - on every possible scenario - as to which method is best for you. We just want to make sure you have all the information to make an educated decision.

In leaving let me just say this - a wise man once told me to own things that go up in value and to rent things that go down in value. As almost all vehicles depreciate in value over time this advice may work well for you too!

Thanks - see you soon.