Leasing a solid choice for all types of drivers
Leasing can be a practical and affordable form of car ownership for many motorists today. Still, many car shoppers find the subject of leasing to be a bit of a mystery.
Auto leasing is simply a form of ownership where motorists get to drive a vehicle for a set period of time (three to four years on average), after which the vehicle is returned to the dealership or leasing company.
The benefits of leasing include a lower monthly payment, minimum maintenance costs, the opportunity to drive a new vehicle more often and no long-term financial obligations.
A common misconception about leasing is that it is geared to business and professional types, who are able to deduct a portion of their lease payments for tax purposes. Not so. Leasing is a popular purchasing option for people from all walks of life and socio-economic backgrounds.
The two types of auto leases are open-end and closed-end. An openend lease puts the lessee responsible for the residual value and assumes all of the financial risk. This type of lease is common with companies that own a fleet of vehicles.
A closed-end lease makes the lessor responsible for the depreciation, but certain conditions in the lease agreement ensure protection of the vehicle from excessive dam- age. This type of lease usually requires a cash down payment, specific kilometre allowances, excess kilometre charges, and the lessee has an option to purchase for a predetermined price at the end of the lease contract.
With any type of auto lease, consumers need to understand their rights and obligations. One of the most important responsibilities is the need to perform regular maintenance on the vehicle, as outlined in the owner’s manual.
Regular maintenance includes oil changes, fuel injection service and tire rotations, along with inspections of the engine, drivetrain, cooling system, electrical components and suspension systems.
If a warranty-related issue occurs, the lessee needs to address it in a prompt manner. To most consumers, this is obvious, and yet some lessees choose to ignore problems because they don’t technically own their vehicle.
The dealership or leasing company allows for normal wear and tear on a leased vehicle. Items that qualify as excessive wear and tear include body panel scratches and dents, windshield damage, mismatched and bald tires, inoperable mechanical and body parts.
Excessive interior damage includes residue from smoking cigarettes, the effect of ultraviolet rays on upholstery, pet stains, broken stereo systems, carpet burns, flood damage, or damage resulting from alterations and modifications.
One of the common surcharges upon lease termination is for excessive kilometres driven. For a variety of reasons, customers often drive more kilometres than their leasing agreements allow, which subjects them to a financial expense based on the excessive-kilometres charge. When your auto lease expires, you are usually faced with the decision of whether to return the vehicle or to purchase the vehicle for the predetermined price stated in the lease agreement. Be sure to factor into your equation any excess kilometre charges and excess wear-and-tear. The important thing to remember about auto leasing is that the automobile doesn’t belong to you. It belongs to the dealership or leasing company, and they expect that vehicle to be returned with the agreed-upon number of kilometres and in top condition. This column represents the view of TADA. Email president@tada.ca or visit tada.ca. Frank Romeo, president of the Trillium Automobile Dealers Association, is a new car dealer in the GTA.