Whether to lease or buy a new vehicle is a question many who are in the market for a new car ask themselves. It’s hard to know what is right, and the answer often depends on your particular circumstances. But there are a few pros and cons that can help you make your decision.
Do I Lease or Do I Buy?
Leasing is attractive for many because you get a new car that comes with a guaranteed regular maintenance schedule. Buying is attractive because you will eventually own the vehicle, which means there’s an eventual opportunity to sell it and gain back some equity.
- With leasing, you agree to own and drive the vehicle for a specified period of time. The initial costs may include a month’s payment, a security deposit, down payment, taxes, and others.
- With buying, you agree to pay the entire cost of the vehicle up front, based on payments made over a period of time. Most often, this requires a loan, either made through a bank or through the dealership.
- With leasing, you may experience additional charges if you choose to end your contract early.
- With buying, if you have financed through a dealership you can always sell your vehicle back to the dealer to gain some capital back towards another vehicle.
- With leasing, you do not gain equity.
- With buying, you gain equity minus depreciation.
- With leasing, you must return the vehicle in conditions matching the terms of your agreement.
- With buying, you may modify your vehicle as you wish.
Is Either Leasing or Buying Better for Car Insurance Rates?
With a new vehicle that you have purchased, we always highly recommend purchasing both comprehensive and collision coverage. New vehicles are extremely expensive to repair, in fact, it’s unaffordable to most. Basic comprehensive coverage does not cover for damage caused to your vehicle in an automobile accident, whereas the addition of collision insurance does.
If you have leased your vehicle you will be required to purchase both comprehensive and collision coverage, as technically it is owned by the leasing company or lienholder. If you are in an accident that was not your fault, the result of the claim will be paid out to the company providing the financing.
Those who choose to lease their vehicles may want to consider an additional form of insurance that will cover you for arrears should a loss paid out on a claim be lower than the financed amount. Let’s say your leased vehicle is valued at $25,000 and is written off. If the lienholder receives less than $25,000, you are responsible for covering the difference.
One of our experienced insurance brokers can help you find this low-cost coverage that can come in very handy.
For comprehensive and collision insurance, there is no difference in rates charged for purchased or leased vehicles. The cost of your coverage will be based on a number of factors, including:
- Driving record. Insurers consider not only how safe your driving record is, but also how long you’ve been driving. More experienced motorists qualify for lower rates, especially if they have proven safety records.
- Where you live. Insurers consult statistical tables to determine how likely a vehicle is to be stolen in your neighbourhood. The higher this risk, the higher your premiums.
- Where you park at night. Do you park on the street, in your driveway, or in a covered garage? These pose varying levels of risk in terms of vehicle damage and theft, with garages being safest.
- What you drive. Some makes and models are hot targets for thieves, while others are more valuable and carry a higher replacement cost. High-performance cars are also considered riskier from an insurance perspective, and the Insurance Bureau of Canada can help if you’d like to know how your vehicle stacks up.
When To Buy
How many kilometres you’ve managed to rack up on your odometer is a good indicator of how much life is left in your service time your car or truck has left, it isn’t everything. What’s more important is to look at the vehicle’s performance. Specifically, is it still running efficiently, or have breakdowns and repairs become more frequent and more costly?
It’s almost always cheaper to fix a damaged car than it is to replace it…except when repairs and maintenance issues have become so frequent that your vehicle has become a money pit. If you’re having to take your vehicle in for major repairs more than once a year or so, it might be time to start thinking about a new set of wheels.
You should also keep careful tabs on your fuel efficiency, especially if you’re driving a higher-mileage vehicle. If you’ve noticed a sharp decline in your vehicle’s fuel performance that doesn’t seem to improve with regular maintenance tasks, this is a key sign that its lifespan is nearing its end. Dramatically diminishing fuel efficiency shows that the vehicle is really struggling to perform, and if increased fuel consumption coincides with other major mechanical issues, it might be time to walk away.
Lane’s Insurance for Your Car Insurance Needs
Always remember that insurance brokers are uniquely positioned to help you secure the lowest possible rates. Brokers can get insurance companies to bid on your business, helping drive your costs down all while providing you with excellent customer support and complete resources.
The experienced and caring brokers at Lane’s Insurance are here to help you with all your auto insurance needs. Get started by visiting Lane’s for a fast, free auto insurance quote.