Before you lease a car for personal or family use, you should compare the benefits and drawbacks with buying the vehicle outright. Leases can be smart financial choices in some situations, but looking at all your options first is a good idea.
The Basics: What is a Lease?
You enter a lease agreement when you are using someone else’s property for a set period of time. These contracts can last just a few months to several years. You promise to provide monthly payments for the use of the vehicle in the case of a vehicle lease. Usually there is a down payment or security fee that starts the agreement, and then regular monthly payments continue after that.
If you lease the vehicle, you do not own it. Leasing is an alternative to buying a car. Different rights and obligations apply to both types of agreements.
Pros and Cons of Leasing a Vehicle
Leasing is often a cheaper alternative to buying a car outright. This is perhaps the most appealing feature of leasing. Both the first payment and the monthly payments are usually cheaper than buying. They also often have lower total taxes because the amount of taxes are based on the amount of the monthly payment for the vehicle.
Leasing allows drivers to afford a more expensive car or one that has more features. It works well for those who want to trade in their vehicles often as well. If you want a new car every few years, leasing may be a good option for you.
The downside to leasing is that you often end up paying more in the long-run for the lease because you still pay interest on the leased vehicle. Because the dealer or lease company still owns the vehicle, they can also dictate certain aspects of your use of thecar. For example, they may require that you perform maintenance at certain intervals. They may also be able to control who drives the vehicle and how many miles you can drive per year. This is true despite the fact that you pay regular payments for the car and pay for insurance. Some drivers do not want to replenish this type of control just for lower payments.
Types of Consumer Leases
There are two major types of lease arrangements that you can establish with a leasing company or dealer. The right option for you will depend on your unique goals and financial circumstances.
- A straight lease is a traditional lease arrangement. You will return the car when the lease is over and owe nothing else. While this is the more conventional method, it is rarely used in practice today.
- A lease with the option to purchase the vehicle is exactly as it sounds. In a closed contract, you already know what it will cost to buy the car at the end of the lease when the lease begins. In an open lease, you may have to pay more to purchase the vehicle at the end of the lease, depending on the value of the car at the end of the lease.
Required Information in Ever Lease Agreement
Lease agreements are covered by the BC Motor Dealer Act Regulation. It is a legally binding contract that must have the following information to be valid under BC law.
- Information about the extended warranty
- All express warranties and guarantees that the manufacturer or motor vehicle has provided
- A description of any required insurance or servicing for the vehicle
- Any limitations regarding the enjoyment of the car (who can drive it, whether it can go outside of BC, )
- The amount of tax included in each payment under the agreement
- The cooling off period
- Information about any liens
Lease contracts may seem straightforward, but they can be complex. If you have questions or concern about your lease agreement, it is a good idea to have an experienced lawyer take a look at the documents before you sign.