On the positive side, because leasing generally offers smaller monthly payments, it means you can ‘afford’ a nicer vehicle for about the same monthly payment. If we use a 2015 Ford Escape SE 1.6 EcoBoost 4WD as an example, its $34,227 net price includes all taxes and fees. Even with no-interest financing over 60 months, the monthly payment is $571. Leasing it over 48 months with 20,000 km annually, the monthly payment is $415. That means you could afford a full-load all-option Titanium version with the more powerful engine and still only pay $556 a month on a lease versus financing.
When your lease is up, you give back the dealership and start the whole process again. You are always given the option of buying out the balance of the lease and either keeping the car or selling it yourself, but most people prefer to restart the cycle with another new vehicle. As such, they never actually own a car, only renting it for a predetermined amount of time.
Depending on the relationship you build with a dealership, there’s a very good chance that they might take your lease back before the end date in order to get you into a new vehicle two or three months early. Especially approaching the new-car-year transition period of the late summer when sales people are desperate to clear out existing inventory. That’s a perfect time to start the inquiries…
Leasing also benefits because it stays within the time or mileage boundaries of the manufacturer’s warranty period, so any nasty surprises will be minimized.
One other thing to keep in mind is that leasing can apply to used vehicles too. Since most of a vehicle’s depreciation occurs within the first year-and-a-half of its life that means smaller payments, even if the up-front cost is the same. This is another benefit to buying a certified pre-owned from the manufacturer as their leasing interest rates are darned close to what they offer on new vehicles.
With financing, the payments will eventually end, leaving you as the full owner with the freedom to do what you want with the car or truck. Given that vehicles are lasting longer than ever – average age of a car is around 10 years old in Canada – there’s a good chance of staving off major repairs if regular maintenance is followed.
Financing also gives you more flexibility if a drastic change in your life forces you to break the deal. Generally, leasing companies charge severe penalties for breaking those contracts, some up to a full year’s worth of payments.
Finally, if you want to do things like modify the vehicle in any way – like a lift-kit on a pickup or different exhaust on a sports car – you’re forbidden to do that under a lease because it will negatively affect the resale value.