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More and more people are
discovering the advantages of leasing. It’s certainly no mystery.
Leasing can offer
convenience and genuine financial benefits - because you pay only for the
portion of the car’s value you use.
Leasing is an attractive alternative to
financing your next vehicle, and offers a number of advantages you may not
have considered: |
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| With leasing, your initial cash
outlay is usually much less than the down payment required to finance the
purchase of a vehicle.
When you purchase a vehicle, you’ll be
asked to pay or finance the Goods and Service Tax (GST) and Provincial
Sales Tax (PST) that become due on delivery of your vehicle. The full
charge for GST and PST are not due at inception of a lease. GST
and PST are included in your monthly payment, saving you an initial cash
outlay, with the potential of tax savings in the long run. |
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| Your monthly lease payments can
be significantly less than the retail finance payment for the same
vehicle. That’s because you pay only for the portion of the
vehicle’s value you use during your lease period, plus a monthly leasing
fee. Retail payments are usually higher for the same term, because
they’re based on the total value of the vehicle (including all
taxes). This will be explained in more detail later. |
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| With the lower initial costs
and monthly payments a Mazda Personal Lease can offer, you’ll keep more
of your disposable cash, making it available for other expenditures or
investment opportunities. You’ll also conserve your borrowing power.
With no large debt outstanding, your full credit remains available. |
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| At the end of your lease, most
often, you have the option of purchasing your vehicle at a pre-agreed
price. You also may have the option of returning the vehicle and leasing
another one. Or, you can simply return the vehicle and walk away. It’s
your choice! |
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| Leasing helps more people
to drive a more luxurious vehicle more often, because the
initial cash outlay and monthly payments are usually less than the retail
payment for the same vehicle. And because your vehicle usually has a
guaranteed lease-end value, a lease eliminates any problems associated
with selling or trading a used vehicle. |
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| With all the advantages leasing
provides, there’s no doubt that it’s an attractive alternative to the
rising costs of vehicle ownership.
The important thing to remember when you
consider leasing your next vehicle is that leasing is an excellent alternative
to buying. Determine the needs of your lifestyle. You may want to take
leasing into account if one of the following situations applies:
- You usually trade your vehicle before
it’s paid off
- You replace your vehicle immediately
after you’ve paid it off
- Driving a new vehicle every two to four
years is something you enjoy and appreciate
- You drive more than average kilometers
each year.
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| Is leasing right for you?
That’s something only you can determine.
A lease can help you drive a more
luxurious vehicle for the same amount of money as if you’d purchased
it. How?
- You have greater financial flexibility
with lower monthly payments
- Leasing may offer potential tax benefits
for leased vehicles used for business purposes
- When you lease, you can usually drive a
new car more often
- Leasing provides the convenience and
dependability of a newer vehicle that is almost always under warranty,
saving you the expense of repairs
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| Many people believe that
leasing and high kilometer drivers just don’t mix. But surprisingly, a
lease can actually become more cost-effective the more kilometers you
drive.
It’s easy to add a greater kilometer
allowance to your lease up front. A kilometer adjustment also reduces your
Purchase Option price, which is a real advantage if you decide to purchase
the vehicle at lease-end. And if you decide not to purchase your vehicle,
any unused prepaid kilometers are usually refunded to you. |
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After you’ve picked out the
vehicle that’s right for you, carefully review the lease terms and
agreement with your dealer so that you understand all your leasing
obligations. Here are some key points to consider:
- Lease Term. A lease will allow
you to select a lease term that fits your needs. Most leasing
companies offer terms from 24 to 60 months, or any term in between.
Flexible leasing terms help you customize your lease for your specific
driving habits, as well as the monthly payment you want to make.
- Initial Cash Outlay. Your first
month’s lease payment, all applicable license and title fees and a
refundable security deposit are due at lease signing. In addition to
this, many leases require an initial down payment. The amount of the
down payment varies from no money on up. Of course, the higher the
down paymen, the lower your monthly lease payments will be. Since
sales taxes are included in your monthly payment amount, your overall
monthly costs will be less than comparable retail purchase where all
sales taxes must be paid at the time of sale.
- Built-in "Gap" Protection.
Many leases provide added peace of mind through built-in
"gap" protection. If your leased vehicle is wrecked and
declared a total loss, or stolen, your lease may be structured to
cover the difference or "gap" between your insurance cheque
and your lease payoff amount. All you’re responsible for is your
insurance deductible and any past-due amounts. Ask your dealer for
details.
- Excessive Kilometer Fees. High
kilometers always affect the value of a vehicle. With a retail
purchase, the dollar deduction of high kilometers is an unknown risk
until you want to trade or sell your vehicle. The varying effects of
high kilometers are easier to predict when you lease your vehicle.
Most leases have a base amount, say 25,000 kilometers per year, built
into the contract at no additional cost. However, if you’re a
high-kilometer driver and need more than the standard kilometers
allowed in your lease contract, the adjustment is easy to make. Just
let your dealer know, and additional kilometers are simply added into
your contract at the time you lease your vehicle. Although your
monthly payment will increase, the adjustment strictly covers the
extra kilometers. Excess kilometer allowances also lower the
Purchase Option price of your vehicle, which is a real advantage if
you decide to purchase your vehicle at lease end. Best of all, if you
don’t use all of your prepaid extra kilometers, and you don’t
purchase the vehicle at the end of your lease, you’ll probably be
entitled to a refund. End-of-lease kilometers greater than the
allowance stated in your lease terms, which were not included in your
Lease Agreement, are subject to an "excessive kilometer"
adjustment.
- "Normal" Wear and Tear. Even
the most well-kept, pampered vehicle will accumulate its share of wear
and age-related damage as it’s used. "Normal" wear and
tear, or what can be expected to occur as a vehicle ages, includes
minor types of damage and wear such as: small parking lot dents and
dings; minor, inconspicuous scratches; small chips in the paint finish
which may be caused by flying stones or other road debris; reduced
tread on tires.
- Excessive Wear and Tear. Unusual
wear and tear, exceeding what can normally be expected to occur as a
vehicle ages, is subject to an excess-wear-and-tear charge.
Excess-wear-and-tear charges can be avoided if you have repairs
completed prior to returning your vehicle. For more information about
what is considered "excess wear and tear," contact your
dealer.
- Refundable Security Deposit. The
deposit, due at lease signing, will be refunded at the end of your
lease, provided there are no excessive kilometre or wear-and-tear
charges, unpaid monthly payments or other charges due.
It’s easy to see there s nothing
mysterious about leasing. Once you understand the facts, it’s as
straight-forward as traditional financing. In many cases, leasing can help
you afford a more luxurious vehicle more often, with little or no down
payment, and lower monthly payments than traditional financing. The
financial advantages of leasing can be significant. |
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| Q. Since I’ve always
owned my vehicles, how does leasing affect equity?
A. One of the reasons lease payments
can be much lower than payments to purchase the same vehicle is that
monthly lease payments are only for the use of the vehicle during the term
of your lease. Lease payments do not include equity. When your lease ends,
if you decide to lease again, you’ll owe only the initial cash outlay of
your first month’s lease payment, applicable license and title fees, and
a refundable security deposit. No equity is necessary.
Q. What happens to the equity I have
in my current vehicle if I decide to lease?
A. If you have equity in your
current vehicle, you have four great options:
1) you can keep your old
vehicle;
2) you can sell
your vehicle yourself and keep the proceeds;
3) you can sell
your vehicle to the dealership and keep the proceeds;
4) you can sell or trade
your old vehicle to the dealership and use the proceeds to reduce your
monthly lease payments on your new vehicle.
Q. Isn't leasing more expensive than
buying?
A. With a lease, your initial cash
outlay is usually less than the cash investment required to purchase a
vehicle, and your monthly lease payment is also usually less than a
conventional retail loan payment. A lease offers more affordable payments
and leaves you with more disposable cash that you can put to work with
other purchases or investment opportunities.
Q. Can I trade my car before my
lease term is scheduled to end?
A. Yes. But terminating your lease
early, that is, "trading in" your leased vehicle, has the same
market risks as with a purchased vehicle. Before you lease, talk with your
dealer about a lease term that will best match your driving habits and
lifestyle needs. Careful planning can help you avoid the potential added
expense of early lease termination.
Q. Can I get a better vehicle by
leasing for the same monthly payment amount I’m currently paying to
purchase my vehicle?
A. A lease has the potential to put
you into a vehicle with more luxurious options than you might be able to
afford with a retail payment. It all depends on the monthly payment
that’s right for you. Consult your dealer for details.
Q. Are there any tax advantages to
leasing?
A. There can be tax advantages to
leasing, depending on your individual circumstances. If you use your
leased vehicle for business purposes, the lease payment, or a portion of
it, may be deductible as a business expense. The potential tax benefits of
leasing versus purchasing are so dependent on your individual
circumstances that, if you’re concerned about tax benefits, consult your
tax advisor before you make a vehicle leasing decision.
Q. What happens at the end of my
lease?
A. There are no hidden charges or
surprises at the end of your lease. The disclosure laws for leasing in
British Columbia are the most comprehensive in Canada and every attempt
has been made to structure the lease in plain language. You know right
from the start exactly how much your monthly payments are, and what types
of fees will be assessed for excessive kilometers or unusual wear and
tear. If you’ve maintained your vehicle properly throughout the term of
your lease, you have three options:
- return the vehicle and walk away after
settling any charges for excessive wear and tear or excessive
kilometers that may have been incurred during the course of your lease
- turn the vehicle in and lease a new one
- purchase your vehicle at the pre-agreed
Purchase Option price stated in your lease
Q. Can I purchase my car before my
lease term is scheduled to end?
A. In order to purchase your vehicle
prior to lease end, you will have to negotiate an early termination with
your dealer. The dealer will usually have to arrange to purchase the lease
from the leasing company and sell the vehicle to you as a used car. You
will be responsible for all fees and taxes associated with the
transaction. Before you lease, talk with your dealer about a lease term
that will best match your driving habits and lifestyle needs. Careful
planning can help you avoid the potential added expense of early
termination. |
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| Capitalized Cost. The
agreed-upon price of the vehicle.
Capitalized Cost Reduction. Any
up-front or down payment that reduces the capitalized cost of the vehicle,
thereby reducing monthly payments. The lessee may also apply the trade-in
value of a vehicle in place of, or in addition to, this payment.
Closed-End Lease. A lease that
stipulates the lessee is not responsible for the market value of the
vehicle when the lease term ends. Also called a "walk-away
lease," it enables the lessee to either return the vehicle to the
dealer (assuming all lease terms have been met) and "walk away,"
or buy the vehicle for the Purchase Option price stated in the Lease
Agreement.
Depreciation. The difference between
the vehicle’s net capitalized cost and its residual value.
Early Termination. Ending the lease
before the scheduled date of termination which is stated in the Lease
Agreement.
Excessive Kilometer Fee. A charge
incurred by the lessee at lease-end if the vehicle has accumulated
kilometers in excess of the kilometer allowance stated in the Lease
Agreement.
Excessive Wear and Tear Charges. A
charge to the lessee at lease-end for unusual wear and tear, exceeding
what can normally be expected to occur as a vehicle ages.
"Gap" Protection. An added
feature of some leases that automatically covers the difference or
"gap" between your insurance settlement and lease payoff amount
if your leased vehicle is wrecked and declared a total loss, or stolen.
All you’re responsible for is your insurance deductible and any past-due
amounts.
Guaranteed Future Value. The
agreed-upon anticipated market value of the leased vehicle at the end of
the lease. This value varies according to lease term, kilometers allowance
and the vehicle’s make and model. The value is established at lease
signing and stated in the Lease Agreement.
Lease. A contract for the use of a
vehicle for a specified time period at a specified payment amount.
Lease-End Value (Residual Value). The
agreed-upon anticipated market value of the leased vehicle at the end of
the lease. This value varies according to lease term, kilometer allowance
and the vehicle’s make and model. The value is established at lease
signing and stated in the Lease Agreement.
Lease Term . The number of months a
lease is in effect.
Lessee. The customer who leases a
vehicle.
Lessor. The party who owns the
vehicle (usually the dealer) and agrees to allow the lessee the use of the
vehicle under the terms of the Lease Agreement.
Manufacturer’s Suggested Retail Price
(MSRP). The retail price of the vehicle as established and listed by
the manufacturer.
Purchase Option/Purchase Option Price.
The Purchase Option price is agreed on between you and your dealer at the
time you sign your lease. This is the price at which you can purchase the
vehicle if you decide to exercise your Purchase Option at the end of your
lease.
Residual Value (Lease-end Value).
The agreed-upon anticipated market value of the leased vehicle at the end
of the lease. This value varies according to lease term, kilometre
allowance, and the vehicle’s make and model. The value is established at
lease signing and is stated in the Lease Agreement.
Security Deposit. An amount used to
offset possible costs associated with excessive wear and tear, excessive
kilometers, or unpaid lease charges at lease-end, where applicable. After
applying the security deposit to any amounts owed by the lessee at lease
end, any remaining deposit is refunded to the lessee.
Term. The number of months a lease
is scheduled to run
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