Trillium Automobile Dealers Association

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Leasing is making a comeback with consumers

Created on Friday, 29 October 2010

General Motors recently announced it would reintroduce leasing on its Buick and Cadillac models. Two years ago, GM and many other auto manufacturers, via their captive finance branches (GMAC, etc.), had ceased offering leasing, due to a major decline in residual values, slumping demand and major tightening of the credit market.

Independent leasing companies also affected by the financial crunch cut back their lease portfolios as well.

Today, with an improving economy and expected stable residual values (what a vehicle is worth at lease end), vehicle leasing is making a comeback. Consumers are once again taking advantage of this method of placing themselves behind the wheel of a new car.

According to Automotive News, auto leasing in the U.S. climbed 21.1 per cent through September, compared to 16.6 per cent for all of 2009. U.S. and Canadian stats are often comparable.

In the past year, attractive interest rates on lease deals are again available, and many shoppers are taking advantage of the competitive offers.

Helping to fuel the gaining leasing momentum, manufacturers have increased lease incentives to an average of $3,069 per vehicle in 2010, an increase of more than $1,000 over 2009.

Leasing is attractive for consumers who wish to drive a new vehicle with payments calculated on only the portion of the vehicle's cost that is depreciated over the lease term. By using available, competitive interest lease rates, often the results are lower monthly payments, compared to the amount that would be required to finance the purchase of the same vehicle.

Leasing offers other advantages, in addition to a lower monthly payment compared to a finance contract over a similar term. Only a monthly portion of the HST, due on the vehicle, is payable each month by the user.

Thus, a lower monthly payment, attractive lease rates, coupled with factory incentives and considerable tax savings have attracted a renewed interest in leasing.

This alternative is not for everyone. The decision to lease rather than buy depends on many factors, including your financial and professional position, your driving needs, both long- and short-term and, more importantly, the annual distance you drive.

If you are serious about leasing your next vehicle, you should examine these needs carefully. Some drivers fail to realistically predict the wear and tear on their vehicles, or they neglect to properly maintain them (regular maintenance visits, including wear items like tires and brakes, are still your responsibility).

Excess kilometres over a predetermined limit will result in additional charges at lease end. Most lessors offer between 20,000 and 24,000 kms per year before excess km charges kick in. Often, this "excess kilometer" penalty can amount to hundreds of dollars at the end of the lease. Vehicles returned with physical and cosmetic damage, which is not the result of normal wear and tear, will be charged to you as well.

Consumers must decide for themselves if leasing is an option that meets their driving requirements and budget.

New car dealers today are again in a position of offer both great finance and lease options to consumers, plus all of the manufacturers' additional incentives. You can decide for yourself and buy with confidence at any OMVIC-registered car dealer. They will be pleased to provide all the information you need to make an informed decision.

Columnist's Note:

Congratulations to our friend and respected fellow GTA dealer, Ron Loveys, of Whiteoak Ford Lincoln in Mississauga. Ron was elected to the Executive Committee of the Canadian Auto Dealers Association at its recent meeting in Ottawa. Ron is the immediate past president of the Toronto Automobile Dealers Association and is the current president of the Canadian International Auto Show, or popularly known as the "Toronto Autoshow."

Go back to Cohen Editorials 2010 »

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