An Inside Look at Vehicle Leasing

September 20th, 2018 by

The Perspective From Inside the Car Dealership

 

 

From the dealer’s view, we know that most customers come to see us when they need a vehicle to get them to school or work. Unfortunately, most of the time, people don’t have the cash on hand to just walk into our showroom and buy a car or truck outright. That’s where leasing a vehicle comes in.

 

Leasing instead of buying

 

Instead of purchasing the car, for more and more people, leasing has become a most welcome option. Financing a car is a relatively easy process, and it’s easy for just about everybody to understand. This is because they probably already have a home mortgage or another sort of secure loan through their bank or lending institution.

 

Leasing can be a little bit more complex. Leasing a car is almost the same as taking out a long-term car loan. People who lease cars don’t own the car and usually are required to return the vehicle at the end of the lease term.

 

For people who’ve never leased a car, the leasing process can seem somewhat confusing. On the surface, it seems geared more toward business owners, who plan to deduct the expense, or toward individuals who simply cannot afford regular car payments. But, in reality, there are numerous benefits to leasing a car, no matter what your career or income status happens to be.

 

Deciding whether to buy or lease a car can often be a difficult decision for consumers. The main problem is because of the complicated method that’s used to calculate monthly lease payments.

 

Which is the better deal?

 

From the dealer’s perspective, we like to think that instead of lending you a new car or truck, we’re lending you an “asset.” You must return the full value of that asset to our dealership, plus interest and any other administrative costs, at the end of the contract period.

 

However, with car leasing, the value of the car you are leasing doesn’t remain constant. It goes lower over time and as you make use of the car. This process is known in the trade as “depreciation,” and it affects nearly every new vehicle that’s either sold or leased. There can also be charges for wear and tear that may affect the value of the car you return from your lease.

 

Lease payments are usually based on the value that the car depreciates divided by the number of months stated in terms of the lease, plus any interest on the remaining balance.

 

As an example, let’s say that you lease a car worth $30,000 for two years. From the car dealership’s perspective, we have just handed you a loan of $30,000. Our dealership calculates that after the two year period of the loan, with normal use, the car will be worth approximately $15,000.

 

Because the lease term is 24 months, your payments on the principal amount will be about $625.00, plus any additional amounts for interest, taxes, and administrative fees.

 

At the end of the lease term, you’ll have paid the dealership $15,000 plus interest, taxes, and fees. You will need to return the car (worth $15,000) to complete the requirements of the loan. You will also usually have the option to buy the car outright from the dealership for its current value.

 

Car leasing payments are tied directly to the monetary value of the car. They often will be slightly lower each month than a regular car loan payment would be, that is if the car had been purchased instead of leased. Typically, your down payment will also be lower with a leased vehicle than with one purchased outright.

 

Lessees should be careful before signing a lease with “deals” that feature unusually low monthly payments. Normally, an amount equal to the car’s depreciation value must be paid back over the term of the lease. Interest is usually calculated as a percentage of the depreciation that hasn’t already been paid back. With lower car lease monthly payments, the depreciation value that you need to pay back becomes higher which causes the interest rate to be higher as well.

 

Another major advantage of purchasing a car rather than leasing is that you own the car. You can drive it any way you like, make modifications, or even sell it because it’s essentially yours to do whatever you want with it. You will also be able to trade-in the vehicle as equity to apply against purchasing another car.

 

On the other hand, a leased car is not yours. You don’t own it, and as a result, you have a lot less freedom to do with it whatever you like. You can’t make any major changes to the car, wear-and-tear charges will apply, and most lease terms limit the number of miles you can put on the car.

 

What are the advantages of leasing a car?

 

The advantages of car leasing:

 

  • You’ll have the newest and latest styling
  • You’ll be driving with the latest technology
  • The performance of your vehicle will be up to date

 

And, while many of today’s new car loan contracts last from 4 to 7 years, with most leasing company contracts, the term is usually only 2 or 3 years.

 

One of the best options, when you lease a car, is that should you decide that you would like to keep the vehicle at the end of the lease, you can still buy. You also might be eligible for a “pull-ahead” offer, that allows you to move over into a new lease even earlier that the time frame in your original contract.

 

There’s another big advantage when you lease a new car or truck from Viking Motors. The price you pay each month can be almost the same as purchasing a used vehicle instead.

 

On the surface, as you drive to and from work, none of the neighbors will be able to spot the difference. Your friends, co-workers, and neighbors will not know whether you purchased your new vehicle or leased it. What they will notice is that as far as they are concerned, you never appear to keep a new vehicle very long. After only a few years, they will probably notice that you nearly always seem to be driving the latest model car or truck on the market.

 

Leasing with Viking Motors

 

Leasing with Chevrolet’s GM Financial program at Viking Motors is today more convenient than ever. And you can use the secure online credit application to save time before walking into our dealership.

 

Viking Motors is Manitoba’s premier source for both new and high-quality used vehicles from Chevrolet, Buick, and GMC. Whether you’re looking to purchase or lease a top-quality new or used car or truck, let our experts be your guide in finding the right vehicle for you and your family.

 

Posted in Financing, Leasing