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Leasing is a good idea, but ask yourself these questions first:

Leasing is a good idea if you:

Want lower initial costs. A lease down payment can be lower than a finance down payment.

Want lower monthly payments. Monthly payments are based on the portion of the vehicle’s value that you intend to use.

Want to drive a more luxurious vehicle. When you lease, you can drive a new vehicle with more features and luxuries for about the same monthly payment as a less-equipped financed vehicle.

Want to drive a new vehicle more often. Lease terms are often shorter than finance terms, allowing you to get into a new vehicle more often.

Want to drive a vehicle during its most trouble-free years. Most manufacturers can tailor a warranty to fit their lease program.

Want to avoid trade-in obligations. With a closed-end lease, you can: return your vehicle at the end of the lease term and walk away; turn it and lease another vehicle; or buy it.

Want to pay taxes only on your monthly payment – instead of financing the lump sum of taxes, you’re taxed on the individual payment you make each month.

When you lease:

Upfront costs may include first month’s payment, a refundable security deposit, down payment, taxes and other charges. Monthly lease payments are usually lower than traditional finance payments because you’re paying for the depreciation of the vehicle over the lease term, along with a borrowing charge, taxes and fees. Annual kilometrage is 24,000 in a typical lease. You may also buy more kilometers upfront or pay a set free fee for each kilometer over the limit at lease end. Charges for excessive wear and tear may be assessed at lease end. Maintenance and repairs ate your responsibility. You do have to ensure the vehicle for the amount of coverage required by your lease. And early end to your lease may result in termination charges. You may be asked to pay an administrative fee to cover the cost of preparing and servicing your lease. If charged, this fee increases the carrying costs and must be included in the APR or the total lease charges expressed as an annual rate.

In a Closed-End Lease:

You don’t own the vehicle; you drive it for the lease term and then either return it or purchase it at the predetermined price, depending on the lease terms.

The future value of the vehicle is not your risk.

Changing your vehicle at lease end includes returning it to the dealer and paying any end-of-lease costs. You can then choose to lease a new vehicle or walk away.

GAP protection is included in most closed-end leases.

In an Open-End Lease:

You don’t own the vehicle; you drive it for the lease term and then either purchase it or return it. If the market value of the vehicle is less then was predetermined, you pay the difference. If the market value is more, you may be entitled to the difference.

The future value of the vehicle is your risk.

Changing your vehicle at lease end includes returning it to the dealer, and paying any end-of-lease costs and any funds owed based on the market value of the vehicle.

GAP protection may not be included.

Before you lease, ask your dealer the following questions:

Is the lease open-end or closed-end?

If it is a closed-end lease, what is the guaranteed option-to-purchase plan?

Is there an administrative fee, and if so, how much?

What are the allowable kilometers and what are the excess kilometer charges?

What is the APR?

Is GAP protection included?

What is the Leased Vehicle Amount (selling price of the vehicle)?

Is a down payment required?

Is there a provision for early purchase?

Can the lease be terminated early? If so, how are the charges calculated?

What is the total monthly payment?

What is the security deposit?

What is the total amount due at lease signing?

What is the total obligation?

What is the term of the lease?

Can I obtain a copy of the lease contract to read before making my decision?

What are the warranty term and kilometer limitations?

Before you lease, ask yourself the following questions:

What will be the primary use of the vehicle?

How many kilometers do I expect to drive per year for the next few years?

Do I expect any lifestyle changes in the near future, such as a job change/transfer, a house purchase or children? If so, will a lease be adaptable to my needs?

Some terms you should understand when considering leasing:

Lease: An agreement under which the vehicle owner (lessor) permits its use by a customer (lessee) for an agreed-upon period of time (term).

Lessee: The user of the leased vehicle.

Lessor: The owner of the leased vehicle.

Term: A contractual period for which the lessee agrees to use and pay for the use of the vehicle.

Lease Rate: The interest rate used to compute the monthly lease payment.

Leased Vehicle Amount: This is the amount agreed upon by the lessee and the lessor for the vehicle and any other items, such as accessories, extra equipment, freight, applicable taxes (e.g., federal air-conditioning tax) and pre-delivery inspection. PST and GST are not included.

Leased Vehicle Amount Reduction: Cash or value of a vehicle trade applied to the lease at the time of lease signing. These funds are sometimes referred to as “down payment” (or capital cost reduction) and reduce the lease’s depreciation and the monthly payment.

Residual: The estimated value of the vehicle at the end of the lease term, used in the calculation of the monthly payment.

Depreciation: The difference between the leased vehicle amount and residual, or the amount assessed the lessee for vehicle use.

Administrative Fee: Administration costs that are a direct result of ownership of the vehicle by the lessor (e.g., insurance follow-up, monthly handling of PST and GST, remarketing of returned vehicles and GAP protection).

Guaranteed Asset Protection (GAP): If an accident, fire, or theft results in the total loss of the vehicle, auto insurance will cover its fair market value, minus the deductible. Often, this settlement is not enough to cover the financial obligation for which the lessee is responsible.

With GAP protection, the lessee does not have to worry about a gap between the lease contract obligation and the insurance settlement.

All he or she pays is the insurance deductible, provided that all of the contractual agreements of the lease have been fulfilled prior to the accident or theft.

Purchase Option: A lease agreement provision allowing the lessee to purchase the vehicle at either scheduled termination or early termination. The purchase option at lease termination is a fixed dollar amount determined at the time of lease signing.

Security Deposit: A refundable dollar amount paid by the lessee to the lessor at the time of lease signing. This amount can be used to pay all or part of the lessee’s excess kilometrage or excess use charges, or other amounts owed at lease end.

Excess Kilometrage: Kilometrage exceeding the allowed kilometrage as outlined in the lease agreement.

Excess Kilometrage Charge: A charge per kilometer that is assessed for kilometrage driven in excess of the contractual allowance.

Excess Wear and Tear Provisions: A section of the lease agreement that establishes the lessee as responsible for the expense to repair or replace vehicle parts which are worn or damaged beyond what the leasing company considers normal.

Annual Percentage Rate (APR): The rate used to compute the finance charge expressed as an annual percentage. The APR is the annualized interest rate when interest is paid at intervals other than annually.

Total Lease Charges: The total lease charges are the total interest and non-interest charges the lessee pays over the term of the lease. These charges are comparable to the finance charges on an installment loan.

Leasing may mot be the answer if you:

Want to own your vehicle.

Are able to make a substantial down payment. A down payment for traditional financing is usually required. The more you put down, the lower your monthly payment. You may also trade in your current vehicle as part of you down payment.

Want to keep your vehicle for more than a few years. Once it’s paid for, you can keep you vehicle as long as you wish.

Want unlimited kilometrage. You’re the owner, so there are no kilometer restrictions.

Want to avoid wear and tear limitations. There are no restrictions when you own the vehicle.

Want to make alterations to the vehicle’s appearance. With ownership, you can make alterations to your vehicle.




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