The Truth About Car Leasing in 2011

As recently as 2008, Canadians enjoyed significant competition in the automotive industry. To stay competitive all of the automakers began offering incredibly low lease rates and incentives to increase their market share.

As you are probably aware, when you purchase a new vehicle, it immediately depreciates in value as soon as you drive it off the lot because it “becomes used”. Some vehicle values can depreciate in value as much as 30% when purchased new. This is why a vehicle is considered a depreciating asset.

Previously, if you had leased a car at 1% or 2% interest you could return it in four years or buy out the lease. So what’s changed?

1. Some dealers like Chrysler (Chrysler Financial) no longer offer leases
2. Other dealers only offer low lease rates on promo vehicles and in the case of Ford, in Feb 2011 their lease rate on the popular Ford Edge was 5.99% (that is really high for a lease)
3. Some new car dealers are offering less residual buy out value on their vehicles (you pay more in lease payments)
4. Some dealers like Kia offer a minimum lease term of 5 years
The only other option that the new car dealers seem to be offering is new car financing over 72 to 84 months. The fact is that they have to stretch the financing over that long to even get to payment on a new vehicle, to an amount that most consumers can afford. The question is, does a 6-7 year car loan make good financial sense? I mean it’s like taking out a mortgage on a car.

If you can’t afford a new car payment financed over 4-5 years than quite frankly you can’t afford a new car. That doesn’t mean you can’t finance a car that meets your budget, and is almost new. Dealers like Prudent Value Cars sell quality pre-owned vehicles and arrange the loan financing over 3-4 year so at the end of your loan, you own something that still has value. For more information please visit www.prudentvaluecars.com