Lease, finance, buy: What you need to know when purchasing a new car

If you’ve been contemplating getting a new whip recently, you’re not alone. With transit seeming less convenient now than ever, it’s no wonder the idea of getting from A to B in the safety of our own private vehicle is rising in popularity.

But although being in the market for a new vehicle is exciting, you might still be confused which is the best way to pay for it. And on top of wondering whether you can afford a new car at all, there’s always the common conundrum of whether you should lease, finance, or buy.

All of these options come with pros and cons. Deciding which one is right for you depends on numerous factors including your goals, lifestyle, and priorities.

We talked to the assistant general manager (AGM) at Regency Lexus, Andrew Lee, to sort fact from fiction when it comes to paying for a car, so you can make the right decision based on your unique needs — and get on the road sooner.

Leasing

Regency Auto

When you lease a car, you can enjoy full ownership during the lease period. At the end of the lease term (typically 36 to 48 months), it’s your choice to return it to the dealer or buy it out. If you choose to return it, you can lease a new model, usually with a lower loyalty rate. According to Lee, leasing is a great option for those who like to switch it up every few years as their lifestyle, needs, and wants change.

The first advantage of leasing? A lower monthly payment. You are only paying a portion of the vehicle’s value — the balance at lease-end is called the residual (forecast value). It’s important to note that the higher your set residual is, the lower your monthly payment will be. This is a key factor to consider when leasing — not just the interest rate.

Another benefit with leasing is the comfort of knowing your new vehicle is under warranty, usually for the duration of your lease term. In general, warranty coverage is for four years, up to 80,000 km, and includes most costly items. However, it differs from manufacturer to manufacturer, so it’s crucial to check the coverage offered. 

In terms of maintenance and wear and tear insurance, packages are available through all dealerships. This should be considered to avoid excessive maintenance costs and unexpected repair bills for damage (including worn tires) at the lease-end. Along with this, the lessee is responsible for returning the vehicle in good shape. That’s why it’s expected that you follow the recommended maintenance schedule.

Lastly, if you get into an accident, the plus side of leasing is that you’re not stuck with the vehicle at the end of your lease term. It’s worth noting that the resale value of a vehicle with a declared accident report can be negatively affected. However, once you have the vehicle repaired through ICBC, you can hand it back to the dealer at the lease-end — with no penalties. After this, move on to a new vehicle.

Financing or buying

Regency Auto

Another alternative to purchasing a car is to finance it (aka, take out a loan). Financing through a dealership is more convenient and easier than going through a bank — and they usually offer better rates. The benefit of financing a car as opposed to leasing it? You own the vehicle and get to use it however you want.

Once you sign over the paperwork, it’s all yours. So, if you want to put on new rims, get a slick paint job done, or wrap or modify your new ride, you absolutely can. However, with financing, you’ll have a higher monthly payment than leasing because you’re paying for the whole value of the car.

If a lump sum payment isn’t the issue, you could consider buying a car outright. Doing so lets you save on the interest you would pay when leasing or financing. If something happens and you no longer need a car, you have the freedom and flexibility to sell it whenever you want to. In terms of mileage, there are also no restrictions when you own a car outright.

However, with buying or financing your car, it’s important to remember that your “investment” is a depreciating asset. It’s usually not worth as much as you think when it comes to selling or trading your vehicle in.

How do you choose?

Regency Auto

For both leasing and financing, it’s important to recognize that with the way interest rates are right now, automotive financial arms are offering vehicles at rates as low as 0%. What this means is that you can lease or finance a car at no interest over the term. This allows for good cash flow because you can keep your money in the bank, let it accumulate interest, and only pay the monthly vehicle payment. 

More and more often, Lee finds himself recommending leasing to customers at the dealership. “It allows for flexibility when life changes,” he explains. “From a two-door coupe, to a four-door coupe, to a minivan, and then back to a four-door coupe.”

He continues, “We have had a lot of success educating guests to move from paying cash to leasing. Especially when they can get into a lease for 0% interest.”

Whether you love to change up your vehicle every few years or prefer to pay cash and keep it for a longer period, there’s a payment method to suit your preference.

Regency Auto has been serving Vancouver, Coquitlam, and the Lower Mainland for over 35 years, assisting thousands of customers with their vehicle purchases. Its mission is to help customers make informed decisions while providing an exceptional experience in a comfortable and welcoming environment.

“Our advisors are here to provide recommendations based on what they’ve learned about the guest’s needs, wants, and lifestyle. We enjoy building long-term relationships with all of our guests,” says Lee.

If you can’t wait to start browsing for your new car and get a personalized opinion on your fresh set of wheels, head to your nearest Regency Auto dealership.