Financial Advice

Should You Lease or Finance?

GP Weissach Financial Services

Our Advice - It is Better to Lease Expensive Vehicles

Put simply, leasing is another way to pay for a vehicle. It is not automatically cheaper or better than financing, but for many buyers it has real advantages. Here is our honest opinion:

For the vehicles we sell, we believe leasing suits most people. As a rule of thumb, leasing makes more sense on cars of this caliber than on lower-priced ones (under $25,000, for example). Here is why:

• You do not pay sales tax upfront. In BC that can be as much as 15% of the purchase price. With a lease, tax applies only to your monthly payments and any down payment. And if you never exercise the purchase option at the end of the lease, you never pay tax on that portion at all, often around 40% of the car’s original value. That is a big saving.

• You avoid paying interest on the tax portion. This helps twice: you save interest on up to 15% of the price, and your balance starts 15% lower. If you decide to change cars before the term ends, you begin with a 15% advantage compared with a loan.

• Taxes aside, leasing simply makes more sense than buying. Buy what appreciates and lease what depreciates. Consider this: you would not purchase a $2,000,000 house to live in if you expected it to be worth $1,250,000 three years later. You would rent. So why pay $200,000 for a car that will typically be worth $125,000 in three years?

• There are further reasons we prefer leasing. Our lease underwriters generally do not report the lease to the credit bureau, so it does not affect your debt service ratio. That leaves you more borrowing capacity for other goals, such as buying a home or investing.

Some customers can borrow on a line of credit at a lower rate than our lease providers offer. But the low rate is often cancelled out by how interest is calculated (frequently compounded daily) and how repayment works. A low-rate line of credit can end up costing far more in total interest than a lease at a higher rate.

More car for your money and lower payments: you have heard those claims before, but what do they mean? If you financed a car over the same term as a lease, the lease payment would ALWAYS be lower. If you stretched the loan to match the lease payment, you would ALWAYS pay more interest at the same rate. That is simple arithmetic: leases give better cash flow than loans.

Drive a new car more often! You may have heard this one too. Lease terms are naturally shorter than loans, but the choice is always yours: buy the car at the end, hand it back to us, or lease something new. A loan offers no such flexibility, leaving you exposed to market swings and to finding a buyer or accepting a trade-in value. A lease effectively locks in your trade-in value, which we think is a strong benefit.

Financing Program

That is our view on leasing, but you may still prefer another route, and that is fair enough.

We also provide financing programs, so you can get the best available rate on your purchase from one of Canada’s leading banks or credit unions.

There is no need to phone your banker, book an appointment or work through a clumsy online process. We handle all of it.

Our lending partners include RBC Royal Bank, TD Bank, Scotiabank and National Bank, among others. Like a mortgage broker, we look for the best combination of rate and term on your behalf, obtain the approval and complete all the paperwork right here at the dealership, saving you time and money.

With fixed or variable options, competitive rates and terms from 12 to 96 months, we can arrange financing on almost every vehicle in stock, whether you lease or finance, on terms that suit your life.