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Leasing: The Alternative Financing Method
Leasing is a different and very unique means of financing a vehicle in comparison to the traditional loan alternative. Leasing allows for the use of a vehicle over time at a lower cost per month, freeing up cash to be used for other purposes.
Tax Savings with a Lease versus a Loan
With leasing, taxes are collected on the monthly lease payment over the term of the lease. With a loan, all taxes on the vehicle price are paid up front. As a result, you end up paying interest on this tax amount. If you elect to purchase the vehicle upon expiry of the lease, you would then pay the tax on the residual value.
Pay Only For What You Use
A lease is based on the anticipated use of the vehicle over a given time period. This time period is measured in months, ranging from 6 to 60 months. With a traditional loan, the vehicle is written down to a zero balance, usually over a 60 or 72 month term. Leasing, in contrast, places a value on the vehicle that reflects the expected usage. If an individual normally likes to drive a different vehicle every three years, a 36 month lease would allow them to pay only for the usage desired, then obtain a new vehicle. If this same individual financed a vehicle over a 72 month period on a loan, they would be left with the hassle of trying to sell the vehicle privately, or potentially losing money by trading the vehicle after 36 months. Because you only pay for the portion of the vehicle that you use when leasing, lease payments can be much lower per month than loan payments, allowing you to drive a more expensive, better equipped car for the same payment as a traditional loan.
Closed-End Versus Open-End Leases
There are two basic types of leases, closed-end leases and open-end leases. Closed end or "walk away" leases enable you to "walk away" at the end of a lease with no further obligation, provided that the car is not damaged, has not been subject to excess wear and tear, and kilometre restrictions have not been exceeded. With a closed-end lease, the leasing company guarantees the residual or end value of the vehicle. An open-end or "no kilometre restrictions" lease allows you to lease a vehicle without any kilometre restrictions, because you guarantee the residual or end-value of the vehicle. If you are a high mileage driver, your O'Regan Leasing Lease Representative can work with you to determine a reasonable end-value based on your expected usage.
Equity and Ownership
Many customers feel they would rather finance a vehicle in the traditional way because they would "rather own it then rent it." However, with a traditional loan, the bank or finance company who holds the lien on the vehicle actually owns it until it is paid off. The only difference then in terms of ownership with leasing versus traditional financing is that the name of the leasing company or lien holder would appear on the vehicle registration and permit.
With a lease, you normally have no equity in the vehicle when the lease term is completed. With a bank loan, you build equity over the term of the loan. However, even though you build equity, the dollars spent to own the car would be much greater than its value. Even though it is an asset, it is a constantly depreciating asset. Most people wouldn't consider the idea of buying a $200,000 property that they are told would be worth $50,000 in five years, but those same people would buy a $20,000 vehicle that they are told would be worth $5,000 in five years. BUY WHAT APPRECIATES, RENT OR LEASE WHAT DEPRECIATES.
New or Pre-owned vehicles
O'Regan's Leasing offers leases on any make and model of new or pre-owned vehicle. Our expert leasing team has connections to a vast network of dealerships, and have the experience and resources to source the vehicle that's right for you and your budget.