Keystone Auto Leasing Inc. Auto and vehicle leasing across Canada


Every article or book written about leasing addresses the question, "Is it better to lease or to buy?". Although the authors of those books often go into great financial detail and rigorous analysis, the answers are always the same — though often presented with a slant that reflects the author's particular viewpoint.

Let's simplify the answers and summarize them here:

1. The monthly cost of leasing is always significantly less than the cost of buying. For the same car, same price, same term, and same down payment, monthly lease expenses will always be 30%-60% lower than loan payments. That's a fact.

2. The total short-term cost of leasing is about the same as the cost of buying. The total cost of leasing compared to buying, over the same lease/loan term, is approximately the same, more or less, assuming you sell your vehicle at the end of the loan. Comparisons sometimes show buying to cost a little less due to fewer fees and the assumption that a purchased vehicle will return full market value if it were sold or traded (often a bad assumption). However, if you factor in the benefits of wisely investing your monthly lease savings, the gross cost of leasing can easily be less than buying.

3. The total long-term cost of leasing is always more than the cost of buying, assuming the buyer keeps his vehicle. If a buyer keeps her car after her loan has been paid off and drives it for many more years, she spreads her cost over a longer term. It doesn't take rocket science to figure out that the cost of leasing five different cars on two-year leases over a period of 10 years is greater than the cost of buying one car and driving it for 10 years. If long-term financial benefits were your only interests in acquiring a new car, you would always choose to buy, preferably with hard cash, and keep the car for years.

So, which is better, lease or buy?

It depends on what's most important to you. All of us have different lifestyles and priorities — in cars and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priority attributes in mind. What's right for one person can be totally wrong for another.

If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about ownership equity, drive an average number of miles, properly maintain your cars, and are willing to pay more over the long haul to get these benefits, then you should lease.

If you don't mind higher monthly payments, prefer to build up some trade-in or resale value, like the idea of having ownership, like paying off your loan to be payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, and don't like the risk of surprise lease-end charges — then you should buy.

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