Leasing vs. Buying – What’s Right For You?

Leasing is officially back for every GM model in our showroom, so with that we thought it’d be nice to give a quick refresher to all of our customers on the benefits of leasing and the benefits of purchasing to help you make the right decision on your next new vehicle.  There is no “right” answer when it comes to the question of which is better, leasing or buying. Everybody has a different situation and a different use for their vehicle, and that in turn will influence which option works best for you. First off, we’ll explain the main differences between the two.

When you buy, you pay for the entire cost of a vehicle, regardless of how many kilometers you will drive it. You pay GST (and PST/HST depending on where you live) on the total cost of the vehicle, and make a monthly payment based on an interest rate determined by the bank/lending institution. Your first monthly payment is made a month after signing the contract, and later you may decide to sell or trade the vehicle for its depreciated resale value. At the end of your finance contract, you own the vehicle outright provided you have met all of the obligations of your contract.

When you lease, you pay a stipulated portion of the vehicles cost, based on the time frame and amount of kilometers you will drive. You pay GST/PST/HST only on your monthly payments, you also pay an interest rate determined by the bank/lending institution, and your first monthly payment is made at the time you sign your contract. At the end of your stipulated lease term, typically 36 or 48 months, you have the option to simply return the vehicle (provided you have met the parameters of the lease), or you can purchase the vehicle for the pre-determined depreciated resale value.

In the short term, lease payments will almost always be slightly lower than a finance payment on the same vehicle. In the long run however, if you plan on keeping your vehicle, financing will prove to be less expensive.

TYPICAL LEASE VS BUY SCENARIO

On a 2011 GMC Terrain SLE AWD (MSRP $30,750) with $2,500 down (can include manufacturer incentives such as GM loyalty, GM Card points etc.) a 48 month lease payment works out to $474.56 with GST included. On the same vehicle with the same $2,500 down a 60 month finance payment works out to $537.48.

So which is better for you?

Lease – If you enjoy driving a new car every three or four years, want a lower monthly payment, like having a car with the latest features, drive an average number of kilometers, and don’t like trading or selling vehicles after you have used them, leasing would be a good option for you.

Buy – If you don’t mind a slightly higher monthly payment, prefer to build up equity and resale value, like having ownership of your vehicle, prefer paying off a loan and keeping a vehicle payment free for a period of time, prefer to keep your vehicles long term or like to customize your vehicles, buying would be a good option for you.