# Lease or Finance new vehicle



## Harp (Jul 18, 2012)

As posted in another thread my wife was involved in a serious car accident (rear-ended from behind). Car was totaled. She suffered severe injuries and who knows when she will be able to work anytime soon. 

Of course we need to look for a new car. Insurance is only paying an amount that will cover our loan since it was past 2 yrs old and the waiver of depreciation was past.

She drove an Elantra and we loved the car but since the accident it has us thinking about safety and maybe a bigger car is the way to go. Problem is that financing a bigger car puts us out of our price range, unless we finance for 8 yrs.

We can get a bigger vehicle, such as a Camry with less then what we were financing the Elantra for at almost half of what our car payment was. Yes, the Camry would be a lease for 4 yrs.

I guess what I am wanting to know: when is lease a good idea vs finance?


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## sags (May 15, 2010)

We just purchased a new Chevrolet Cruze LT.

It is designated as a "compact" but is just inches from being classified as a "mid size" vehicle, like the Malibu.

GM offered 84 months at 0% interest..........no money down, 4 years of free oil changes and a 40 cent a litre off gas card for 800 litres of gas.

There have been some recalls for older models...........but we have had no problems and love the car.

It is fairly highly rated by car testers, and is top rated on safety with 10 air bags. It is a big seller for GM.

I would buy over lease..........unless you can write off the interest for a business. At the end of the lease is where the problem lies.

You would have to pay for any over kilometers usage, any damage that wasn't deemed "normal wear and tear" and have to safety check and e-test the car to take over ownership if you want to keep the car.

Our payments for the Cruze are in the $300 a month range and include tinting, undercoating, life insurance, gap insurance, and extended warranty.

Without the extras...........payments would be in the $250 range.

It was our experience that buying older used cars cost us more to keep on the road, than they were worth.........so I wouldn't recommend that route.

The Hyundais are nice as well............but are smaller than the Cruze and feel like a smaller car when driving them.

Just a thought..........

Interesting that you are describing where "gap insurance" would have been a good thing to have..........but most people would probably recommend against buying it when purchasing a car.

Like all insurance........it is an unecessary expense if you don't use it...........but nice to have if you do.


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## Harp (Jul 18, 2012)

sags said:


> We just purchased a new Chevrolet Cruze LT.
> 
> It is designated as a "compact" but is just inches from being classified as a "mid size" vehicle, like the Malibu.
> 
> ...


While she loved our Elantra, and I did too, it almost leaves bad memories now when I see one. The car did its job and she is alive. But now she is so scared all she wants to look at is a Yukon or Highlander! LOL! A little bit past our budget for sure.

I thought about the Cruze also. She has to be comfortable driving whatever we choose.

Lets say we finance for 84 months and 60 months into it we get into another accident and car is totalled - i am sure we still will come out on the losing end because insurance will not pay us what our loan is, only what fair market value is. Thats what got me thinking of leasing.


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## Plugging Along (Jan 3, 2011)

Generally leasing is a less financially sound option unless you are writing off the lease. 

If you get on an accident with leasing, I believe you are still on the hook for the fair market value if written off, plus perhaps some penalties.


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## sags (May 15, 2010)

You might want to consider "gap insurance" if it will ease your concerns. The cost is minimal over 84 months.


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## Addy (Mar 12, 2010)

Plugging Along said:


> Generally leasing is a less financially sound option unless you are writing off the lease.
> 
> If you get on an accident with leasing, I believe you are still on the hook for the fair market value if written off, plus perhaps some penalties.


Bingo! When my less than 3 yr old leased Civic was stolen in Vancouver, I received what was owed on the lease (via the leasing company) but no more, no less. Thankful in one way, at least I wasn't out of pocket, but it made me never want to lease again as I could very well have been on the hook for a lot of money, and I'm sure it was in the lease agreement which (I was young and naive 20 something year old at the time) I failed to read thoroughly. A few lessons learned on my part.

We own privately two vehicles that we use for our business. We crunched the numbers and it's better for us to buy ~1 year old vehicles at a good price, and write off the expenses. I'm sure it varies, every individual would have to consider the options and compare the numbers to decide if you should lease or buy.


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## Harp (Jul 18, 2012)

sags said:


> You might want to consider "gap insurance" if it will ease your concerns. The cost is minimal over 84 months.


Most def! I wish I knew about before although I fought and was able to get ins to give me enough to cover the loan and we come out even. I swear this whole situation is going to drive me to drink!


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## HaroldCrump (Jun 10, 2009)

Have you looked into buying used?
I personally am not a big fan of Hyundai - the only Hyundai I'd even consider is the Sonata, and I don't like the new design.
The Sonata from 3 - 4 years ago looked like a true full size car.

I have driven the Cruze and found it better than the Elantra and certainly better than the Echo.
But I don't know the respective safety ratings.

Given your financing constraints, I think you should consider buying a used full size car.
Used Hondas and Toyotas are expensive, but they are safe and hold their value pretty well.

If your wife is feeling queasy about driving a small/mid-size (which is totally understandable), you can consider a used mini-van.
They are probably not that much more expensive than full size.


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## Harp (Jul 18, 2012)

HaroldCrump said:


> Have you looked into buying used?
> I personally am not a big fan of Hyundai - the only Hyundai I'd even consider is the Sonata, and I don't like the new design.
> The Sonata from 3 - 4 years ago looked like a true full size car.
> 
> ...


I thought the route of the mini van also but it looks weird: we are a couple in our mid-30's with no kids driving a mini-van...??!! All we need is a poodle and we have become my parents! LOL!

Then again, who cares what ppl say or think - we have to do what is best for us.

Maybe its just me looking at too many cars but the majority of cars have all taken-on a rounded look. Where's the old box-style..?? I miss that.


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## HaroldCrump (Jun 10, 2009)

I know what you mean by "rounded looks".
I don't like that, but neither do I like the "box style", such as the Soul or Element.
It reminds me of London taxi cabs, LOL.

I like just the plain old vanilla full size passenger cars like the Impala, Intrepid, Concorde, etc.
Or even the pre 2004 Taurus.

Regarding mini vans, I wouldn't care what people think.
If that makes you feel safer (and most mini vans have excellent safety ratings), and fits within your budget, go for it.


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## kcowan (Jul 1, 2010)

Have you considered one of the lease takeover sites? Often companies contract for cars and then a change in circumstances requires them to be disposed of. Nothing down, take over payments. If the car mileage and condition are consistent with the lease terms, you can end up with a sweet buyout price in a couple of years. I made $1400 on my sedan when I moved from Ontario to BC.


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## Ihatetaxes (May 5, 2010)

sags said:


> include tinting, undercoating, life insurance, gap insurance, and extended warranty.


A car salespersons dream customer. Bet they made more commission off selling you these items then the car itself.


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## sags (May 15, 2010)

Oh yea...........they didn't make much on the car, but did okay on the "extras".

If a person is paying cash, I can understand buying a couple years old car, but financing a used car will be more expensive than a new one.

The higher financing rates for used vehicles..........and the expiration of the warranty.........make the decision to buy used less clear cut.

Today's cars, although engineered and built with better quality, are expensive to fix.......especially with all the built in electronics in modern vehicles.

The leasing companies turn over the vehicles in their fleets just before the 60,000 kilometer mark because of the warranty expiration.


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## wendi1 (Oct 2, 2013)

My problem with leasing is that you have to know how many kms you are going to drive annually for the length of the lease.

If your circumstances change (say babies, or an overseas job offer, or a great job a longer commute away), you might have to try to break your lease or get someone to take it over. I would also be very wary of a contract where the dealer decides how much wear and tear is normal, and the price of repairing any overages.

If you buy a car, and your circumstances change, it is relatively easy to sell it.

On the other hand, I don't care about cars much (I drive a 16 year old Escort), and have never bought or leased a new car (only used ones).


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## tygrus (Mar 13, 2012)

Generally, it was thought that leasing anything that depreciates and doesn't return income is the way to go.

However, now that vehicles are so much more reliable, the best "value" is to buy something outright cash that is a year or two old with about 20,000 kms on it and 40,000 kms of warranty left and then drive it into the ground.

The new car game has become much like the ladies purse game. People overspend for the same utility. A car simply gets you from one place to another and can assist you in earning employment income. Therefore something in the $25-30k range will fit that need. The fools buy the $60k cars that do exactly the same thing but with a little more fake chrome molding.


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## cannew (Jun 19, 2011)

Haven't read all the threads, but I think you will always be better off buying. Even if you have your own company, buy the vehicle yourself and claim Travel Expenses, at so much per Km for travel (staying within Canada Custom guidelines). In the long run you'll be way ahead.


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## Harp (Jul 18, 2012)

I am thinking a new civic finance. Its fits in our budget, holds its value, rated well in crash ratings and doesn't bring back bad memories for her.


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## wendi1 (Oct 2, 2013)

Sorry, Harp, what's a civic finance? I have an uncomfortable feeling it's the same as a henweigh.


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## Harp (Jul 18, 2012)

Financing a Honda Civic.


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## Feruk (Aug 15, 2012)

sags said:


> GM offered 84 months at 0% interest


No such thing as "0% financing". Your actual financing rate was the difference between what you paid and what the car would've cost if you were paying cash.


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## Lephturn (Aug 31, 2009)

Feruk said:


> No such thing as "0% financing". Your actual financing rate was the difference between what you paid and what the car would've cost if you were paying cash.


This is often not the case. You can pay cash and most times you will not get a lower price. Why? Well it is a combination of very low interest rates and finance companies paying for access to your information. Large financial institutions can borrow money at extremely low rates (0.25%) so that means offering a zero rate is within reach. Now combine that with the value of a customer account that they will then use to try to sell you other loans and credit cards and the finance companies themselves can and do offer 0% deals. The end result is that the dealership doesn't care if you lease, finance, or pay cash, it makes no difference to them in many cases. The reason they want you to finance or lease is simply because it is always easier to make a sale when looking at smaller $/month than looking at writing a big cheque for the true cost.


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## marina628 (Dec 14, 2010)

I know at Ford the finance price at 0% was different than the cash price because of some cost the deal does have to buy down the rate.Being a survivor of a serious accident I can tell you that you are wasting your time if you think any car is going to make a difference.My dad took one of these longer 0% finance deals but he had cash sitting in the bank he could pay for it.If you need a long loan to bring the payments into your budget you are buying too much car IMO.


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## sags (May 15, 2010)

I pay the dealer invoice price, so there would be no extra "discount" for cash. 

The dealership gets a flat rate $500 from GM for the sale..........plus the commission from any add-on purchases.

As Lephturn says......there is no incentive for a dealership to offer a discount for a cash purchase. They get paid cash either way........and often an additional kickback from the finance company, when it is financed.

In actual fact, dealerships make very little from new car sales, except for high end units. There is much more profit in selling used cars. New cars generate business for the dealership in warranty and servicing.

Our financing was from TD Auto.........so they are paid a little from GM as well, I would imagine.

The auto companies, dealerships, and lenders all work hand in hand.

At 0% interest...........what would be the point of spending your own money today?

In actuality........with a long term 0% interest rate......you are using future dollars to pay for the purchase, and they will probably be worth less than today.

As for depreciation.........the vehicle depreciates regardless of how you pay for it.

But, whatever people feel comfortable with............


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## FluxCapacitor (Dec 9, 2011)

We just leased an Acura MDX. The financing rate on the MDX was crazy - like 4 or 5% if I recall. The lease rate was just 2%. We actually plan to hold on to the MDX for a long, long time, so we'll buy it out. It works out way cheaper with the lease and buyout due to the much lower rate.

So there are exceptions to the rule.


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## kcowan (Jul 1, 2010)

sags said:


> I pay the dealer invoice price, so there would be no extra "discount" for cash. ..


The last car I leased had a price 10% below the Unionville dealer invoice price. This was a highly secret number but we inferred it from a friend's totalled car being replaced.


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## sags (May 15, 2010)

kcowan said:


> The last car I leased had a price 10% below the Unionville dealer invoice price. This was a highly secret number but we inferred it from a friend's totalled car being replaced.


It can happen. 

There is nothing to stop a dealer from selling below their cost, if they want to move inventory for a variety of reasons.........could be to relieve servicing costs, gain space for more popular models, hit sales milestones to achieve rewards and rebates from the manufacturers.

It is a good deal for the customer when it happens........but the dealer won't be in business long if they do it all the time.

It was surprising how fast some of the biggest dealers went bankrupt.

Loading up with trailer loads of parts one day..................a "stop all shipments" placard on their location the next.


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## RBull (Jan 20, 2013)

kcowan said:


> The last car I leased had a price 10% below the Unionville dealer invoice price. This was a highly secret number but we inferred it from a friend's totalled car being replaced.


Without seeing specifics and comparing apples to apples this would be hard to "infer" accurately. All dealers receive rebates ranging 2-4% from manufacturers after a car is sold or leased and registered for warranty. Further rebates may be also be available for specific promotions or models the manufacturer needs to move, so the real invoice price could very well be even lower. This stuff isn't really secret.


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## sags (May 15, 2010)

This is what shopping for a car used to look like..............


View attachment 1274


or maybe this..........

View attachment 1282


or hopefully.............one of those Mustangs

View attachment 1290


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## kcowan (Jul 1, 2010)

RBull said:


> Without seeing specifics and comparing apples to apples this would be hard to "infer" accurately...


The insurance company settled with my friend and had to confirm that the cheque would cover a new replacement vehicle from the leasing company. Unionville motors was just the fulfillment channel. So he knew exactly what the price was. I inferred what my replacement cost would be (for a larger model).


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