TADA

Trillium Automobile Dealers Association

Serving the interest of Ontario New Car
and Truck Dealerships for over 100 years

Thinking of leasing? Do your homework

Published on Friday, 08 June 2012

Leasing can be a practical and affordable form of car ownership for many motorists today. Still, many car shoppers find the subject of leasing to be a bit of a mystery.

Auto leasing is simply a form of ownership where motorists get to drive a vehicle for a set period of time (three to four years on average), after which the vehicle is returned to the dealership or leasing company.

The benefits of leasing include a lower monthly payment, minimum maintenance costs, the opportunity to drive a new vehicle more often, and no long-term financial obligations.

A common misperception about leasing is that it is geared to business and professional types, who are able to deduct a portion of their lease payments for tax purposes. Not so. Leasing is a popular purchasing option for people from all walks of life and socio-economic backgrounds.

The two types of auto leases are open-end and closed-end. An open-end lease puts the lessee responsible for the residual value and assumes all of the financial risk. This type of lease is common with companies who own a fleet of vehicles.

A closed-end lease makes the lessor responsible for the depreciation, but certain conditions in the lease agreement ensure to protect the vehicle from excessive damage. This type of lease usually requires a cash down payment, specific kilometer allowances, excess kilometer charges, and the lessee has an option to purchase for a predetermined price at the end of the lease contract.

With any type of auto lease, consumers need to understand their rights and obligations. One of the most important responsibilities is the need to perform regular maintenance on the vehicle, as outlined in the owner’s manual.
Regular maintenance includes oil changes, fuel injection service and tire rotations, along with inspections of the engine, drive train, cooling system, electrical components and suspension systems.

If a warranty-related issue occurs, the lessee needs to address it in a prompt manner. To most consumers, this is obvious, and yet some lessees choose to ignore problems because they don’t technically own their vehicle.

The dealership or leasing company allows for normal wear and tear on a leased vehicle. Items that qualify as excessive wear and tear include body panel scratches and dents, windshield damage, mismatched and bald tires, inoperable mechanical and body parts.

Excessive interior damage includes residue from smoking cigarettes, the effect of ultraviolet rays on upholstery, pet stains, broken stereo systems, carpet burns, flood damage, or damage resulting from alterations and modifications.

One of the common surcharges upon lease termination is for excessive kilometers driven. For a variety of reasons, customers often drive more kilometers than their leasing agreements allow, which subjects them to a financial expense based on the excessive kilometers charge.

When your auto lease expires you are usually faced with the decision of whether to return the vehicle or to purchase the vehicle for the predetermined price stated in the lease agreement. It is wise to weigh both options and determine what is best for you. Be sure to factor into your equation any excess kilometer charges and excess wear and tear expenses as this often determines your best option.

The important thing to remember about auto leasing is that the automobile doesn’t belong to you. It belongs to the dealership or leasing company, and they expect that vehicle to be returned with the agreed-upon number of kilometers and in top condition.

Before returning a leased vehicle, I’d recommend having the vehicle cleaned inside and out and returned to the dealership for a pre-return inspection. A dealer will identify any deficiencies and make the necessary repairs at a more reasonable cost than a manufacturer would charge.

For more information on auto leasing, contact a leasing specialist at any new car dealership


Trillium Automobile Dealers Association president Frank Romeo is a new car dealer in the GTA. This column represents the view of TADA. Visit tada.ca or email president@tada.ca


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