2023-2024 Student Resource Handbook

64 www.apa.ca www.carhelpcanada.com DIAMANT MOTORS 1870 Kipling Avenue Toronto, ON. M9W 4J1 Tel: 416-241-1773 BUYING VS LEASING It’s time for a new car. You have heard different things about your payment options, but you’re still confused about whether or not you should lease or buy. Which is the better option? The truth is it depends on the individual customer. There are factors such as how you plan to use the vehicle and how often you would like to get a new one that should be considered when you’re making your decision. Leasing will allow for you to get a new car every 2 to 5 years, depending on the duration of your lease. Leasing is great because it gives you the opportunity to drive a car during the best years of its life while it’s still covered by factory warranty. It will also enable you to avoid the costly repair expenses that you would pay yourself if you were to drive an older vehicle that’s out of warranty. When you compare lease payments to financing payments on a particular vehicle that is of interest, you will often find that the lease payment is lower. When your payment amount is calculated, the future value of the vehicle is taken into account, and instead of you paying the complete cost for the vehicle, customers will pay for the portion of the vehicle’s value that they will use during the term of the lease. So, by leasing a vehicle, you could potentially pay less for the exact vehicle you would have otherwise financed because you are only paying a portion of the value - the portion you will use. However, it is important for you to know that you will not always find lease payments to be lower than finance payments because of factors like rates, incentives, and contract structure, which influence the payment amount. When financing a vehicle, it will be yours to keep after you have completed the payments. Because you are paying the entire purchase price of the vehicle, your monthly payments will typically be higher than a similar term lease payments. But, each payment helps build vehicle equity toward your future trade-in. Leasing a vehicle comes with some limitations. Although with leasing you will be given a variety of options to choose from, you’re obligated not to exceed an agreed upon limit of kilometres in your contract. In the event that you do exceed the mileage limit, you are responsible for paying the excess charges. Your options for customizing your vehicle are also limited. Any extras you add to your vehicle must be done through your dealer at the time of purchase and have to be approved. A normal amount of wear and tear is covered in your lease agreement, but you will be required pay for any excess damage at the end of your lease-- unless you decide to purchase the vehicle at lease end. Financing a vehicle gives you the freedom to drive it as much as you want. After all, it’s yours. You can customize it any way you like at any given time. While you don’t have to worry about any extra charges, do keep in mind that higher mileage and excessive wear and tear will impact your vehicle’s resale or trade-in value. There are two types of leases: Open-Ended and Closed-Ended. The Open-Ended lease is more popular among consumers. This type of lease holds the Lessor (the one who lends the vehicle) responsible for the depreciation. In return, the lease agreement limits the mileage and protects the vehicle from excess damage. The contract predicts that the wear and tear will be normal. The Closed-Ended lease holds the Lessee (you) responsible for the residual value; the Lessee guarantees a value on the vehicle at the end of its use. In that sense, there is no mileage limit on the lease agreement. At the end of the term, the Lessee can purchase the vehicle at the price of the residual value indicated on the agreement, or return the vehicle and pay the difference between the residual value and its market value. The Closed-Ended lease puts all the financial risks on the Lessee; he or she will pay the bill if the depreciation is worse than expected. “ Buying Vs Leasing” provided courtesy of: Whiteoak Ford For more information see their ad on: Page 77