Lease or Finance ?
When it comes to deciding whether to purchase or lease a vehicle, there are many pieces of the puzzle to consider. Here are a few pros and cons for each. Ultimately though, the best way to determine what works best for your financial situation is to speak to one of our Honda sales & leasing specialists - they will be better able to judge your individual financial situation.
Leasing
There are a few advantages to leasing your new Honda. First, an individual who could not afford to finance a certain car due to high monthly payments can lease the same vehicle for a lower monthly payment. Second, by leasing a car, you turn the vehicle in before the factory warranty expires, and therefore you never have to deal with mechanical difficulties. Also, at the end of your lease, you can walk away from the car, and not have to worry about negotiating its trade in value. This is an attractive option especially if the vehicle has been involved in an accident or insurance claim while you have leased it. At the end of 36 or 48 months, you turn it back in and you're done.With Honda leases the residual value is guaranteed by the leasing company so you cant be held responsible should the market take a negative turn, residual vs value.
Make certain the kilometer allowance on your lease reflect your actual driving patterns, to avoid excess km charges. Most Honda leases allow 24,000kms / year. Higher kms are available at a discounted rate if you allow for them upfront.
The disadvantage of leasing is that in the long run, the customer will pay more in carrying costs than through financing or by paying cash since the carrying cost of residual value never disappear.
20 Reasons why leasing is your best option!
1. Don't pay taxes up front - pay as you go.
2. Drive a car under warranty with Honda Plus UPL (upgradeable for lease)
3. More car for the same monthly payment
4. Lowest cost of ownership - return car before major expenses occur
5. Enjoy a new car every few years
6. Always be protected with the latest safety technology
7. Save with the latest fuel economy technology
8. Keep your cash / equity for investing
9. Life changes - Leases can easily be re- assigned with our Lease Take Over Program
10. Change vehicles as your lifestyle needs change
11. Protect yourself against monetary loss due to an accident (material loss of value)
12. Protect yourself from major legal liability - Honda is the named "owner"
13. Protect yourself from market value changes Guaranteed future value - no risk from market declines
14. Let us deal with your insurance company should the vehicle become a total loss
15. Participate in equity in a used car up market
16. Lower monthly payment - free up monthly budget to pay down mortgage or increase RRSP
17. Eliminate the stress of trade in appraisals or selling you car
18. Bankruptcy protection
19. Take advantage of Loyalty Renewal programs
20. Get more value added accessories for less per month than finance
Financing
If you don't like the idea of leasing because you want to own your car, but you cannot afford to buy the car outright, then financing is the way to go. Financing is the way most people decide to pay for their cars, however it may not be the best way. The high monthly prices can make for a problem at the end of the financing period. Some people find it hard to pay upwards of $700.00 a month for a car, especially in that last year of financing where the customer would be driving a 5 year old car, and still be making those payments when its time to pay for replacement tires , brakes and larger service bills.
Avoid extended finance terms. Keep a realistic view that cars depreciate, you don't want to be in a position of owing more on your car after 3 or 4 years, of making payments, than the car is worth. This is called negative equity and occurs when payments are stretch out over too long a term and the car depreciates faster than you are paying it down. Avoid loans with balloon payments for the same reasons. Leasing usually looks really good in this situation.
Paying Cash
Paying with cash makes the most sense on paper. By buying the car outright, you avoid finance rates and the hassle of making monthly payments. In some situations there are discounts available to pay cash or not not participate in below market finance incentives. However, by keeping the car for a long period of time, you are virtually guaranteed to take a hard hit when it comes time to trade the car in. If a customer can afford to pay with cash, it makes the most financial sense if they trade their automobiles in after every 3 or 4 years, before the value of their car really depreciates.*
*Burdick, Christopher. (2001-2011) Leasing a Car vs Financing a Car: a Beginner's Guide. Retrieved from https://www.autoheroes.com/resources/article_leasing.shtml