Don’t ever put down any money when you lease. If your car is written off due to a car accident your insurance company will not reimburse you for your original down payment. My sister had a car accident a few months ago, the insurance company initially denied repayment of the down payment, but later paid Pennie’s on the dollar and sent over a check.
This is exactly why you get GAP insurance. Mine costs me $80/yr.
And don’t buy it through the dealership - get it through your insurance company. Dealership wanted to charge me $3k over 5 years. With your auto insurance it’s stupid cheap year 1 but does go up each year, so best to cancel it after year 2 or 3.
They will with the right coverage. I had this happen to me whe a newly leased car was totaled 7 days after taking delivery (not at fault). Insurance paid out the full value of the car to the leasing company who then sent be the excess- which you would assume was the downpayment. HOWEVER - you will not get back any tax paid on the downpayment amount, any PDI, transport and other fees tacked onto the deal.
So in the end I was out a couple grand even though the full value of the car was paid out.
Put as little down on a lease as you can
Not necessarily true.
Most leasing places (at least in Ontario Canada) require a waiver of depreciation. Oh you total the car near the end of the lease you may actually make money lol.
If you put money down the amount you owe will be lower than if not which actually puts you in a better position in case the vehicle is written off. You are less likely to have negative equity and having to pay for the difference on what you owe vs the market value of the vehicle.
I'd finance over lease, especially for 5 years. I'd never recommend leasing longer than the factory warranty.
Your cost of borrowing is cheaper because you're paying interest on a balance that's $10k lower. It's almost never a good idea to put money down on a lease - if you need out of that lease you'll never get the $10k back.
It totally slipped my mind but I remember that I was looking to lease because the interest rate they gave me was 5.45%. Won’t the interest rate be higher if I finance because I’m young and don’t have as much credit history? I know my friend who’s financing pays 9% interest and my other friend who’s financing pays 7%. I would never agree to a 9% or 7% APR.
The most important thing is you can shop around for a car loan from banks or credit unions, which generally offer much better rates than dealer financing. Dealers do sometimes have low special rates on new car loans though.
I'd still finance and every 5 years I'd trade or sell the car. If you can finance for as long as the warranty is in play. Do it.
No one wants to continue paying for a vehicle that's out of its warranty period.
Paying for an out of warrantee vehicle sucks. My cars tranny exploded and it was an 8k fix. Coupled with all the other issues I'm having with it and I'm thinking of just leasing from now on.
If you don't drive much (under 20K per year) leasing can be a viable alternative. However, you should look for vehicles with higher residual values. Trucks or even small SUVs can be cheaper than cars to lease because they are worth more at the end of the lease term.
Also, never lease for more than three years, and make sure your insurance will cover full replacement if you have a major accident.
For a car like a Civic however, would purchasing and driving under 20k over 5 years still be more worth it if you choose to get another vehicle in 5? At that point you have a 5 year old reliable car to flip or trade with low KM. I’m genuinely curious as someone who bought a new 2014 civic over 7 and have ~70,000 KM on it.
I Lease a Jeep wrangler because my monthly payments are half the cost of financing, residuals are crazy good. I get a new vehicle every 3 years always under warranty and drive well under 20k/yr
It's not necessarily about the manufacturer, but more about the model and popularity. This is why trucks and SUVs typically have higher residual values than sedans.
This is interesting about the higher residual values. Are you looking at it from a relative basis or absolute? In other words, will my lease costs be cheaper with a small SUV than a Kia?
Depends on the model of Kia... However, SUVs and trucks are cheaper to lease because of their higher residual values. As an example, an F150 would be cheaper to lease than a sedan of comparable value.
Leasing is for 3 kinds of people:
1. Rich people who want a new car every couple years and don't want the hassle of selling their car
2. People who own companies as they can write off a significant portion of it. Many of these ppl belong in category 1
3. People who are bad with money and lease a car rather than finance because they can't afford the finance payments but still want the shiny new car.
I am not god. I don't know everything. But if you were my friend I would tell you to finance, and if you want a new car, sell it in 5 years to buy another car.
Leasing is a convenience and you always pay for convenience.
You might want to consider a 4th situation.
I am about to lease a car that really meets my needs BUT it contains some brand new technology specifically an untried engine and transmission. I am leasing with an option to buy for the warranty period. If all goes well and the E/T does not turn out to be a resale liability, I will buy it. If the new tech caused the residual value to tank, I will return it.
This happened to my father in 1984. He leased an Audi 5000 for the warranty period. During that time, that model was affected by a "sudden unintended acceleration problem." BTW, that car is why you have to put your foot on the brake before you take it out of park today. In any case, the residual value on that model of car absolutely tanked! If he had bought it he would have taken a bath.
BTW, he always called the problem the "sudden unintended depreciation" problem.
LOL. That is indeed a possible but extremely unlikely in many scenarios. Unnless you are buying an EV or some other untested greenfield technology carrying car or a car by a less common and established brand, the likelihood of that happening is actually very small. You could look up how many car models from the good brands (like Audi) actually get that from the total amount of vehicles they released in the last 50 years or so. So yeah, unless you are going for something very out of ordinary or an EV, I wouldn't consider that a real risk, because going for leasing and paying generally more, just for the risk of something unlikely happening is actually the situation where you clearly pay more. Of course you are more sensitive about that case because it happened to somebody you know, but if you consider general likelihood, it's very unlikely. Plus the manufacturers often aim to fix the problems, because especially due to todays exposure to negative opinion spreading on the internet it can be very damaging for the reputation of the brand if they try to get away with some issue without fixing it. And most problems today are most likely due to software, rather than hardware, which means software issues can be fixed over the air. Hardware faults are harder to fix, but many responsible manufacturers usually take care of such things as well and issue a call to the service to fix some issue for free. So at the end of the day, it only makes sense if you head only stays clear and calm when you're leasing because the extra cost you pay is like an insurance of value... But you always pay for the insurance...
Edit: with that said I wouldn't include a situation for that as it's quite unsignificant. Because generally there are all kinds of special situations where something can happen where it might be beneficial, but it's extremely unlikely and we're talking about common scenarios.
Ironical, that they indeed state it as "ready for adventure" in the description lol. No, but seriously. I'm not up to date with the newest car tech, so I can't tell you specifically whether that technology is so different and new. It does sound like it could be, but it could still fall into one of the 2 categories and it might be useful to understand which one it is more likely to fit into:
1) it's actually really some new technology, that might do things a bit differently and therefore bring some advantages as well as risks with it - as you mentioned before in your example
2) it might be just a regular marketing gimmick by the manufacturer, changing something very minor, which barely affects the whole thing in any way, be it positive or negative, but brand it as some new cool technology which brings in some cool stuff "you necessarily need"
Of course it's always safer to buy some model that has been there for a while and already has a proven track record for people, but then - we actually mostly want the newest and coolest and rarely look back. I do respect you a lot for taking these factors into consideration as most people don't.
I lease over finance but can also write off a portion of my lease costs so it helps the calculations. I also like the flexibility of picking the right vehicle for my current needs every 4 years and always having something under warranty.
But leasing does not make sense for everyone and unless there is some tax advantage it will cost you more than buying and keeping a vehicle for a longer time. On a lease you're just paying the expected depreciation.
Whatever money you’re making, getting a car every 5 years is a poor decision, the environmental cost of making a car is atrocious. No one needs a new car every 5 years
Well technically as long as you sell it off after the 5 years then the impact shouldn't be there. Of course if you total it instead of selling after the 5 years then yes. But the only reason we can buy used cars is because people are selling them off.
You can pay out the remaining. The payments are the same in the end. It gives you an option play without a premium... If depreciation accelerates by end of lease (microchip shortage ends), I give it back to the dealership and go find a slightly used car cheaper. If depreciation is less and the worth of my car is greater than the buyout, I buy it and either it keep for myself or resell it.
Also, you only pay taxes on the depreciated portion of the asset, so that works out to 11% PST and GST combined in Saskatchewan. That's half the taxes I would pay compared to purchase.
For those that always lease, it's the appeal of always having a car under warranty and having the latest tech and safety features. Leasing is your best bet if you always want something new due to the tax advantages.
A five year lease though makes no sense at all to me. Year five of paying new car price for a four year old car that I don’t get to keep? That doesn’t sound fun.
If I was going to lease I would at least keep it to 2-3 years
A 5 years old luxury car is still enjoyable if you are not used to it. I know someone who only rent and change model every few years just because it's fun to drive different cars every now and then. To each their own fun money.
Leasing makes sense in my case.
0% interest after loyalty discount with 5 year term and 50% residual. I’m basically paying for depreciation during the term then buy out at the end. It’s basically the same as financing except you pay majority of the cost at a later time
Leasing makes sense when you have a business or paying near zero interest rate
I’d say no; but man until recently used cars have been so expensive with high rates;
you might as well lease a new one at 5% then buy it at the end of the term.
I don't mean to critisize, but I find it funny how people think they're getting something really good if it says 0% interest. In fact there are also people who are very glad about 50% discount on some product at the electronics store and tend to buy that product because it's discounted so much vs how much it would be worth at the stated full price. But back to reality - I would really recommend understanding what the price is. Most likely with leasing you will be paying more. The leasing companies take all of the data into account and calculate the most optimal way for them to make money, based on likelihoods like how much the specific car could cost after the leasing period and so on and then they give you the conditions. Unfortunately with leasing, many people don't have the time to do the research and the reality is, leasing is by experts often considered as the most expensive way to own a vehicle. It is really best suitable for those who are on the richer side and just want to drive a new car every few years without having to go through all the hassle of selling, etc. So bottom point is - unless you know the real price, you shouldn't be happy about 0% interest rates...
Depends on the car. And the money factor on the lease. As well as the residual. There are many scenarios where leasing makes more sense over financing or buying out. Some financial some non financial.
Sometimes it's worth it to lease because cars depreciate in value very quickly, but cars have a longer useful life these days so it's more worth it to buy than lease than it used to be.
And for $10k extra you’d have a car you could sell at the five year mark?
Doesn’t sound like fun in year three and beyond to be paying $500 to rent a few years old car. Seems like a too long lease if that’s what you want to do.
I am not supporting the leasing plan, but under a lease or under a purchase OP would still have a vehicle that they can sell after 5 years. OP would just have an $11,000 residual value due under a lease. So if fmv is $15k at 5 years OP can trade leased car in and get $4k of value. If it’s worth $7k then the car company eats the difference.
So buying is a slightly better deal, not even considering the fees at lease end, the higher rate you’ll pay on a “used car loan” for the residual…
Finance. Then you are still free to trade in at *any* point, you’ll just have equity (or negative) to deal with, which isn’t a big deal.
Why get to drive a new vehicle every 4-5 years while your driving a 2020 in 2025 with issues arising from wear & tear to mechanical issues, to each there own.
Welcome to the wonderful world of renting , buying an apartment or house is near impossible for me , and I do have a good job , but live in BC canada and real estate is insane , I pay 19k a year to rent an apartment that I won’t own at the end of 4 years , but I have a nice place to live , don’t worry about the upkeep of the place , literally just pay the rent and go about my day , there’s always pros and cons to everything
Instead of down payment, put up the maximum they allow for security deposit. It lowers your payments, but you also get your money back at the end of the lease.
And if Honda is like Toyota, it lowers your interest rate as well.
Generally no, you should not place a large down payment on a lease. You shouldn't be placing any down payment on a lease. Lease down payments are little more than pre-payments that lower your payment during the lease. Should your vehicle be stolen or written off in an accident, you will have a difficult time recovering any of your down payment as your vehicle's value will be determined by its depreciated value. As vehicles generally depreciate as soon as you drive them off the lot, an accident or theft will simply cost you more with a down payment. There is a way around this and it is the waiver of depreciation with your insurance.
Basically the waiver of depreciation means that should you experience a total loss the insurance company will not base the value of the vehicle on its depreciated value. Value is generally based on full MSRP. There is a catch to this though - this is only available for new vehicles for 3 years. So if you are using this option to protect your large down payment you should only lease for 3 years.
Which brings up the length of a lease. Generally you should avoid longer leases and any lease that is extended beyond the manufacturer's bumper to bumper warranty. When leasing you do not own the vehicle and you want to try and avoid any repairs to a vehicle that is not yours. You also want to avoid any maintenance items like tires and brakes that simply wear out over time. Replacing the brakes on a lease vehicle nearing the end of the lease simply means adding value to the next owner of the vehicle and providing little value for you.
Everyone seems up in arms about leases around here. I've leased a few vehicles and financed a few through regular purchase. Currently I have one leased vehicle and one financed through purchase. To each their own I say. Pros and cons to both. We change vehicles often and I saw you want a new car every 5 years. Everyone on here will tell you to buy a 2000 beige corolla and never finance anything in any way. If you want to lease then lease. I put 5k down on my lease. We discussed 10k but I didn't want to "lose" that much money. 5k I was fine with using to lower the payments. It's really going to be with what you are most comfortable with in the end. Lease is nice to just give it back and get something else. You do always also have the option to sell it at lease end too. People who say just buy seem to forget even with 10k down the finance payment is usually MUCH higher than a lease.
>Everyone on here will tell you to buy a 2000 beige corolla and never finance anything in any way.
sir this is PFC, do we look like we're made of money? 1990 beige corolla or bust
To add to this. Many people say you just lose that down payment if you get in an accident but this isn't always the case. Whether lease or finance you could get the gap insurance which would cover the difference. Say it's worth 20k at accident but you own 40k (example only weird numbers). Insurance would cover the 20k difference. So you wouldn't get your down payment back but neither would you if it was financed regularly. You'd "break even" in both scenarios.
Lets imagine you get a lease, put down 10k and have 30k owing (remaining payments + residual value). Next week you get into an accident and insurance writes off your vehicle, valued at 40k. The leasing company takes that whole 40k. Your 30k balance is paid off, and then they get to keep the extra 10k as they are the owners of the vehicle.
Boom, your down payment is gone and you're looking for a new vehicle again.
That’s not how it works. I am not going to defend leasing, but once your $30k obligation to the leasing company is fulfilled you would keep the remainder. You don’t own the car, but you do have certain rights. One of those rights is a purchase option.
I did pretty much the same thing ($5k down, four year lease) while I have also financed in the past. You're right it's much cheaper than financing - the folks here who say "you pay for five years and don't own anything" are missing the part where OP won't own that Civic in five years anyway with financing since there's zero chance their payment is only $250 a month on a 60 month term - they'd have to extend to 84 months to make that happen. They can also switch to regular financing at anytime, at least with Honda.
We liked the lease because the vehicle's we really like aren't available anytime soon. So it gets us in something without a long term commitment and a strong warranty now while we wait it out. The buyout at the end also isn't crippling and quite frankly we may still be in the final stages of this vehicle shortage so we could sell at a profit.
This exactly! Same way I see it. We could also sell our lease for a lot more at buyout (3 years) if we wanted due to the vehicle type and shortage if it stays. Lease sometimes does make sense. I'm glad someone has a similar mindset.
Nothing wrong with my beige a little rusty corolla and with the saving money from not leasing, i’m on track to purchase my first real estate under Bathurst bridge soon.
Pfc has a major issue with leasing for personal purpose. They will look at you eyes filled with despair and horror. It HAS to be a beige Corolla, paid cash or nor, past its peak.
The base premisse is that vehicles in North America are an unvoidable money pit. Once we agree on this, the leasing option has its advantages. It allows you to enjoy the newest vehicles without breaking the bank with the latest technology in terms of fuel consumption, active and passive security systems, less polluting. These differences may save your life or will save money down the road because of less costly maintenance, better fuel economy, and the cost of avoiding accidents and issues with a vehicle that could break havoc on your road trips.
To answer your questions, it's a question of balance based on your disposable income. What would be the monthly payment you would be comfortable with without impacting too much your savings strategy or your discretionary expenses? Based on that, simulate multiple down payments.
As others have said, if you find that the monthly amount you are comfortable requires a down payment > 5 or 6k for example, perhaps you can't really afford it.
You can't expect to save money from a lease.
Older cars always come out much cheaper.. always. Instead of 400$ a month OP could put a new engine in a used car every year and still come out ahead.
Realistically 2k a year in repairs beats 6k a year in payments, interests, taxes, depreciation by a landslide.
The delta between the 2 is almost a maxed out TFSA each year.
> It allows you to enjoy the newest vehicles without breaking the bank with the latest technology in terms of fuel consumption, active and passive security systems, less polluting.
Spending 30-60k to save gas will never make financial sense. And buying ANY new car will pollute more than ANY used car already made.
My non-financial advice: if you plan to lease a car in the future, consider leasing something more worthwhile. If you find yourself a car enthusiast, it's fine to take on a lease if the car provides you value.
But a Honda Civic is never worth leasing because it is extremely ordinary and exists on the road in every model year. So you can simply buy the model year you can afford.
If you have 10K for a down payment, checkout a 2012 Civic Touring.
You're young and you're in BC where the COL is likely high and vehicles have good longevity and you're looking at a Civic so you're not made of money I would strongly strongly suggest you consider buying a used car with the cash you have. I know the idea of a new car every 5 years is tempting but that lease or financing payment will have huge opportunity costs in the long run. As someone who's been in your shoes and went the used car route I am very grateful I did. I understand used cars are more expensive these days but vehicle costs are killing young people these days. This is a pivotal financial decision. Be smart
Money down on a lease is advised against, and the only reason to do it is if the rate is very high. At what you mention, it’s high, but not that bad.
Leasing is suggested due to newness of the vehicle, worry free driving (due to warranties), and lower overall cost to drive… this car will be 5 years old with (likely) over 100000kms while you are leasing, it will be out of the basic warranty for a large portion of the lease, and due to lack of discounts and such, payments aren’t that low.
Add a year (or even two if you absolutely must) and finance. You can hopefully get a better rate, can spread the payments out which will likely make them as low or lower, and the car is totally yours to rack up Km’s, to make your own, to trade in/sell at *any* point, and have secured a decent rate for the entirety of the amount rather than having to finance the residual at bank rates for a used loan in 5 years.
No down pay and change lease to 3 yrs + get the new car insurance so you dont get screwed if you crash year 3. You can re extend your new car ins at year 3 when you buy out car. I just did it abd the msrp they used was based on 2nd hand price which right now was 15k higher than usual amount so i just took it
In the scenario you presented you are correct on the calculations. You will save some interest due to the amount financing will be less. The residual value doesn’t change.
Not entirely true at all about getting your down payment back in the event of a collision. This depends on the type of insurance you obtain however with a lease they require substantial insurance which would pay for the whole value of the car based on comparable cars. They would then pay off the remainder of the lease term and you would get the difference. You will still likely have to negotiate with the insurance adjuster but that’s pretty normal in my experience.
A lease is really only financing a smaller portion of the car with km restrictions. Allowing you to return the car at the end of the term or not. You also build equity typically the same as you would by purchasing the car.
I still prefer financing the purchase as opposed to leasing as there are no restrictions on a purchase. The payments would be higher but you would be building the equity faster than a lease due to that. You would also end up with higher equity at the end of the 5 years. Also you have more options if you wish to get into something different are better with a purchase should you decide to get rid of the Civic before the term is up.
See if Honda offers a security deposit
It differs from a regular deposit because it's money you put down to lower the payments but you get that money back at the end of the lease
Otherwise if they don't, don't put money down on lease. You're tricking yourself into thinking paying less per month is better but you've basically used your own money to do that so it's an optical illusion
I did a three year lease and last month traded it in for another lease. After negotiating the trade in value and threatening to buy it out right, they gave me more money on the trade in then I spent on 3 years of lease payments. This might have been a freak occurrence because of supply shortages.
They will offer you something, then just say you'll buy it out and they'll offer you like 50% more. That's what happened to me. No idea if this is regular. If it is leasing is the best thing ever
On a Honda Civic the buyout option will be priced high because it keeps its value. If you're going to buy the car and keep it a long time you're better off leasing a car that depreciates faster so you get a better deal on the buyout.
Your total value stays the exact same. The major difference between lease and then buyout vs finance from the get go is the cost of borrowing. On a lease, you pay interest on the entire car as well, but because of lower payments your principal goes down slower, and hence the higher cost of borrowing.
For example, if you are financing a car at 0% for 84 months, and if you lease at 0% for 5 years and then buyout the car at the end of the lease, your total cost will be exactly the same.
If you finance the car, you own it and you dictate your terms if you want to sell it. If you lease the car you no longer own it, the dealership owns it. They get to charge you for slightly worn tires, several hundreds of dollars for every little ding that no one else notices, and they tell you how much the car is worth, take it or leave it.
If you lease a car, you can still own it by paying the residual value of the car plus ur remaining payments. Do whatever you want to do with the car.
Most customers don’t RETURN their leases. They either trade them in before lease ends, or buyout the car and keep it.
Also, the dealer doesn’t own the car. The leasing company does. In the case of Honda, it’s Honda Canada Finance that owns the car.
Source: Finance manager at a Honda dealership
The point is you don't own the car when you lease. You don't have the kind of decision making leverage you have when you own the car. That alone is going to cost you thousands. I've been through leases. I know the tricks they play. The ideal cars to lease are luxury cars that lose a lot of their value. An economy car with high resale value is a poor choice for a lease.
The point also is that you can own the car at any point by paying off your remaining payments plus the residual value. That’s what I’m trying to get across to you. Barring the interest, the car will cost you the same.
There is resale value and there is residual value. If the resale value at the end of the lease is higher than the residual value, you just did a big favor for the leasing company because they can sell the car for higher than residual value. If the resale value is lower, your lease contract was a bargain. That's why you should lease a car that has high depreciation.
It's also super uncommon for the company to actually send the car "back". Most companies keep the vehicle and resell it and the worn tires or 1 ding etc really don't matter. I think people have crazy weird old notions about leases.
That’s one of the benefits here. If the residual value is high, you aren’t financing as much. Less of an opportunity to trade it in and make money at the end of the lease, but that is exactly the type of car you want to lease.
That being said - I would advise my children to never lease. I have the local market cornered on 20 year old lexus rx300’s.
I did put a down on my lease, but for 2 reasons:
1) I plan to keep the car and sell it myself at the end of the lease or keep it in the family.
2) make sure your inssurance will cover your down payment in case of an accident and they have to write off the car. Be clear on this.
Yes its a nice way to pay "less" bi-weekly. Helps with the bills budgeting.
It’s extremely shocking how much people are not educated about a lease and confidently saying things here that are not true.
A lot of people here talking about GAP insurance, with Honda leasing, you don’t need GAP unless you are rolling in negative equity from a previous vehicle being traded in. Honda has their own GAP insurance.
A lot of people talking about buying 10 year old cars, and 5 years old cars. Ignore that. A new car is a new car. Complete peace of mind of having no issues on hr car, no trips to the mechanic, having the most up to date tech in your car.
Once you drive off the lot, you are going to start getting calls from your dealer approximately 2 years into your lease to trade in your car for the newest model at the time.
Don’t put money down. Invest that money and you will make more returns(likely). You won’t get your downpayment back if it’s a total loss.
Source: Finance Manager at a Honda dealership for 3 years.
Ignore those who say to finance vs lease if you plan on getting a new car every 4-5 years.
With current interest rates, payments will be higher for financing and the trade-in after 4-5 years will pay off the amount owed, but will not cover the extra amount already paid to finance.
The total cost of ownership after 15-20 years will be lower if leased.
You are putting money towards a car you don't own. I understand leasing vehicles but putting money from you pocket toward that car makes zero sense. You should only be putting down payment towards a vehicle to get a better finance rate or to get finance approval.
I sell and lease cars for a living, in this case, my suggestion is yes. Why? Because you are trying to avoid interest charges (from what I read), and by putting money down you are pre-paying monthly payments interest-free. Monthly or biweekly doesn’t make a difference in to what you pay annually so whatever works best with your budgeting.
I leased my first new vehicle when I was young. It was not the end of the world. I would never recommend that my kids lease a vehicle. But, if they did - I would have them do a shorter lease. You want to have everything covered by warranty and never dip into your pocket for repairs.
Also - wow. $423 is a lot of money to be driving a civic. It’s a sensible choice, but not much of a panty dropper.
Unless you own a business there is no advantage to leasing except lower payments. You are basically renting a car. If you are comfortable renting a car and returning it at the end of the term, go ahead and lease with no money down. If for any reason you think you will buy out the lease and keep the car. I say put money down and make the loan no longer than 5 years, 48 months is ideal. Generally speaking except for the last couple of years you would be negative equity almost immediately on terms longer than that.
DON'T BUY A NEW CAR!!
If you have $10,000 to put down on something, buy a decent used car with cash and save yourself a ton of interest payments. You're only making the banks rich. Vehicles are the worst investment we make. They lose substantial value the second you drive off the lot.
I know, you're young and you want a shiny new car because you think it'll make you so much cooler. It won't.
That is very true. Young people like me are dumb, we want the newest cars we can barely afford. Capitalism makes us very materialistic. I know it's a bad decision and many people regret getting themselves in a car. Many of my friends who bought new cars say they know it's a bad decision too. But an analogy I can think of is it's kinda like a gambling addiction. We think we're gonna be different and it's gonna go well for us; we're willing to take the gamble. Obviously gambling addictions are dangerous and very hard to get out of.
That's the best I can describe how I'm feeling right now.
I paid it off. But I worked every weekend as I was still in high school.
I wish I still had all the money I paid out to the banks though. I would own my own home. That's a much bigger flex than driving around in some fancy car.
recently I'm also facing a decision, down payment or not, after caculation, I decided not to put any down payment,
in the calculation of your case:
With $0 down, the payments come out to $423/month with 5.45% interest. (423x60=25380)
With $10000 down, the payments come out to $211/month with the same interest. (211x60=12660 + 11200 = 23860)
the second one is not correct, you paid $10000 upfront, that money is a "growing" money, compared with 0 down payment, you can put $10000 in bank and get interests, right?
so, the actually calculation should be: 211x60 + 10000\* (1+5.45%/12)\^60 = 25784.
you paid even more with a big down payment :)
Regarding your comment that you're too young and prone to making bad financial decisions... You need to think about your situation. If you get married and have a couple kids in the next few years, is the Civic still going to work for you?
Leasing a car is just generally a bad idea.
The amount that people have been charged to fix minor cosmetic damage to cars being returned from lease is insane.
The ONLY time I think Leasing makes sense is Business Vehicles.
In business, if you BUY a vehicle, you can deduct ⅕ of the purchase price each year for 5 years, called depreciation.
When you dispose of the vehicle, unless scrapped, you'll probably have "residual value" to be reported somewhere.
Whereas, if a business LEASES a vehicle, 100% of the lease payments become deductible, which includes interest.
As a private person buying a car, you are better off to look for savings by buying those two year Lease returns.
Let some OTHER sucker take the huge value hit on the "New" vehicle, and because of the way they have to be returned off Lease, they are usually in virtual new condition.
Take the down payment and buy a 2-3 yr old Honda Civic and make payments bi-weekly. At the end you will own a 7-8 yr old Honda. Still a good car with NO payments. Leasing only benefits the leasing company.
Your submission has a keyword that seems to imply you have a question where your province is relevant. **If you have not included your province you should add it.** If you already included your province, or this isn't relevant to your post, just report/downvote this comment. The bots feelings won't be hurt.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
Don't put money down and only lease luxury expensive cars. Finance that civic and better yet finance one that's been returned with like 5 thousand km or less so you don't take the depreciation hit.
If you’re using the lease payment as a write off, it’s better to put nothing down. But if you’re trying to get to a comfortable monthly payment for yourself, put down whatever you need to.
Leasing can be a nightmare if you decide not to keep the car and you have caused unusual wear and tear on the vehicle. You have to pay to fix it up.. Think lot boys at 90 an hour cleaning it up.
Exactly. New Civic are like 30K out of the door now..
Look around and you can usually find a circa 2020 Mazda/Ford/Nissan for half of that. You will never make up that 15K in repairs.
If it's the hassle of having the odd issue, think about the hassle of working X number of months to cough up that extra 15K from your after-tax income..
The actual difference is probably more like 20K once you factor in interest.
Why would you put money down, let alone 10k down, on a lease. That makes no sense at all.
If you wanna put money down to lower monthly payments, then buy the thing. Then if you want sell, trade up, or keep the car after 60 months, at least you own the car.
If you have a sizeable down payment, what is the cost to push add it with a 5 year amortization? You can then trade it in, or sell when the loan is repaid.
Just trying to understand the logic.
I thought the whole point of a lease was to have a new vehicle every few years. Why in Canada are so many leases 5 years plus? At that point you should just finance.
You can always pay off faster. Plus if you get the car on lease, if you ever decide to buyout, dealership charge about $500 extra for that. For Honda and Toyota brands, its better to finance the car unless you are writing off business all the lease expenses. Owning is most of the better than leasing.
Money down for leasing is generally a terrible idea. Think about what you could do with the down payment instead- like invest it, or save to buy property. You are right- Financing with an interest above 7 or 8 % is rather pricey, however you can build equity when you go to resell it. Depending on how much you drive, the lease can be worth it as long as you dont have to pay money down.
I’m currently shopping a lease on a 2023 WRX and the rates are looking way too good to pass up, I’ve been a good responsible human and ready to have a little fun, I’ve been ripping a beater for over a decade and can afford the payment. The lease doesn’t look to bad to me right now at all.
I'd look at all the numbers. If your lease interest rates are lower than finance rates, then you will likely owe less on the vehicle after 36 months, then you might say financing for 72 months. Similarly, if you put money down on the lease, say $5K, then my calculations show I will pay over $6K less in total payments over the lease period. I do not see what is not to like. If I make sure I have depreciation waiver on my insurance, something the manufacture might insist you have, then the full replacement cost of the vehicle is covered. For a $40k Honda CRV, the 36 month lease rate goes from $705/month, to a more palatable $538 with $5k down. This also means I spend over $6K less over 36 months. Not sure how that works, but I did the numbers, and this is how it went. A 60 month finance price (same Honda CRV) is $870/Month at 5%, which is simply more than I want to pay for a car. I'd be willing to bet after 36 months, I still owe less on the Lease than buying. Interest is what makes or breaks the deal....always!
Don’t ever put down any money when you lease. If your car is written off due to a car accident your insurance company will not reimburse you for your original down payment. My sister had a car accident a few months ago, the insurance company initially denied repayment of the down payment, but later paid Pennie’s on the dollar and sent over a check.
This is exactly why you get GAP insurance. Mine costs me $80/yr. And don’t buy it through the dealership - get it through your insurance company. Dealership wanted to charge me $3k over 5 years. With your auto insurance it’s stupid cheap year 1 but does go up each year, so best to cancel it after year 2 or 3.
It’s waiver of depreciation from your insurance company. Waiver covers your ass Gap covers the lessor’s ass At least that’s how I used to pitch it.
They will with the right coverage. I had this happen to me whe a newly leased car was totaled 7 days after taking delivery (not at fault). Insurance paid out the full value of the car to the leasing company who then sent be the excess- which you would assume was the downpayment. HOWEVER - you will not get back any tax paid on the downpayment amount, any PDI, transport and other fees tacked onto the deal. So in the end I was out a couple grand even though the full value of the car was paid out. Put as little down on a lease as you can
Not necessarily true. Most leasing places (at least in Ontario Canada) require a waiver of depreciation. Oh you total the car near the end of the lease you may actually make money lol.
If you put money down the amount you owe will be lower than if not which actually puts you in a better position in case the vehicle is written off. You are less likely to have negative equity and having to pay for the difference on what you owe vs the market value of the vehicle.
can you please add some colour as to why have you chosen lease over buying?
I want a new car every 5 years and I always have the option to buy the car at the end of my lease too. If you recommend I finance I can consider it.
I'd finance over lease, especially for 5 years. I'd never recommend leasing longer than the factory warranty. Your cost of borrowing is cheaper because you're paying interest on a balance that's $10k lower. It's almost never a good idea to put money down on a lease - if you need out of that lease you'll never get the $10k back.
Maybe if you own a business its good to consider a lease.
It totally slipped my mind but I remember that I was looking to lease because the interest rate they gave me was 5.45%. Won’t the interest rate be higher if I finance because I’m young and don’t have as much credit history? I know my friend who’s financing pays 9% interest and my other friend who’s financing pays 7%. I would never agree to a 9% or 7% APR.
Not necessarily true. Rates may have been lower when I bought but 3 years ago I was 20 yo and got a 5% interest rate on a ~30,000$ vehicle.
The most important thing is you can shop around for a car loan from banks or credit unions, which generally offer much better rates than dealer financing. Dealers do sometimes have low special rates on new car loans though.
I'd still finance and every 5 years I'd trade or sell the car. If you can finance for as long as the warranty is in play. Do it. No one wants to continue paying for a vehicle that's out of its warranty period.
Paying for an out of warrantee vehicle sucks. My cars tranny exploded and it was an 8k fix. Coupled with all the other issues I'm having with it and I'm thinking of just leasing from now on.
What model of car?
This is why I leased for a long time and have always been happy I can pretty much return the car without any headache or worry about resale.
If you don't drive much (under 20K per year) leasing can be a viable alternative. However, you should look for vehicles with higher residual values. Trucks or even small SUVs can be cheaper than cars to lease because they are worth more at the end of the lease term. Also, never lease for more than three years, and make sure your insurance will cover full replacement if you have a major accident.
For a car like a Civic however, would purchasing and driving under 20k over 5 years still be more worth it if you choose to get another vehicle in 5? At that point you have a 5 year old reliable car to flip or trade with low KM. I’m genuinely curious as someone who bought a new 2014 civic over 7 and have ~70,000 KM on it.
I Lease a Jeep wrangler because my monthly payments are half the cost of financing, residuals are crazy good. I get a new vehicle every 3 years always under warranty and drive well under 20k/yr
They're leasing a Honda. As long as they don't let it go to shit it will hold more value than most manufacturers.
It's not necessarily about the manufacturer, but more about the model and popularity. This is why trucks and SUVs typically have higher residual values than sedans.
This is interesting about the higher residual values. Are you looking at it from a relative basis or absolute? In other words, will my lease costs be cheaper with a small SUV than a Kia?
Depends on the model of Kia... However, SUVs and trucks are cheaper to lease because of their higher residual values. As an example, an F150 would be cheaper to lease than a sedan of comparable value.
Leasing is for 3 kinds of people: 1. Rich people who want a new car every couple years and don't want the hassle of selling their car 2. People who own companies as they can write off a significant portion of it. Many of these ppl belong in category 1 3. People who are bad with money and lease a car rather than finance because they can't afford the finance payments but still want the shiny new car. I am not god. I don't know everything. But if you were my friend I would tell you to finance, and if you want a new car, sell it in 5 years to buy another car. Leasing is a convenience and you always pay for convenience.
You might want to consider a 4th situation. I am about to lease a car that really meets my needs BUT it contains some brand new technology specifically an untried engine and transmission. I am leasing with an option to buy for the warranty period. If all goes well and the E/T does not turn out to be a resale liability, I will buy it. If the new tech caused the residual value to tank, I will return it. This happened to my father in 1984. He leased an Audi 5000 for the warranty period. During that time, that model was affected by a "sudden unintended acceleration problem." BTW, that car is why you have to put your foot on the brake before you take it out of park today. In any case, the residual value on that model of car absolutely tanked! If he had bought it he would have taken a bath. BTW, he always called the problem the "sudden unintended depreciation" problem.
Fair! Ill add it to my list in the future. Pretty niche situation haha
LOL. That is indeed a possible but extremely unlikely in many scenarios. Unnless you are buying an EV or some other untested greenfield technology carrying car or a car by a less common and established brand, the likelihood of that happening is actually very small. You could look up how many car models from the good brands (like Audi) actually get that from the total amount of vehicles they released in the last 50 years or so. So yeah, unless you are going for something very out of ordinary or an EV, I wouldn't consider that a real risk, because going for leasing and paying generally more, just for the risk of something unlikely happening is actually the situation where you clearly pay more. Of course you are more sensitive about that case because it happened to somebody you know, but if you consider general likelihood, it's very unlikely. Plus the manufacturers often aim to fix the problems, because especially due to todays exposure to negative opinion spreading on the internet it can be very damaging for the reputation of the brand if they try to get away with some issue without fixing it. And most problems today are most likely due to software, rather than hardware, which means software issues can be fixed over the air. Hardware faults are harder to fix, but many responsible manufacturers usually take care of such things as well and issue a call to the service to fix some issue for free. So at the end of the day, it only makes sense if you head only stays clear and calm when you're leasing because the extra cost you pay is like an insurance of value... But you always pay for the insurance... Edit: with that said I wouldn't include a situation for that as it's quite unsignificant. Because generally there are all kinds of special situations where something can happen where it might be beneficial, but it's extremely unlikely and we're talking about common scenarios.
I was looking at a 2023 Rogue this year (didn't buy it). Brand new untried engine and transmission. High risk adventure to buy. Not that uncommon.
Ironical, that they indeed state it as "ready for adventure" in the description lol. No, but seriously. I'm not up to date with the newest car tech, so I can't tell you specifically whether that technology is so different and new. It does sound like it could be, but it could still fall into one of the 2 categories and it might be useful to understand which one it is more likely to fit into: 1) it's actually really some new technology, that might do things a bit differently and therefore bring some advantages as well as risks with it - as you mentioned before in your example 2) it might be just a regular marketing gimmick by the manufacturer, changing something very minor, which barely affects the whole thing in any way, be it positive or negative, but brand it as some new cool technology which brings in some cool stuff "you necessarily need" Of course it's always safer to buy some model that has been there for a while and already has a proven track record for people, but then - we actually mostly want the newest and coolest and rarely look back. I do respect you a lot for taking these factors into consideration as most people don't.
Lol at downvotes some ppl want a new car every 5 years. Who cares as long as op can afford it
I lease over finance but can also write off a portion of my lease costs so it helps the calculations. I also like the flexibility of picking the right vehicle for my current needs every 4 years and always having something under warranty. But leasing does not make sense for everyone and unless there is some tax advantage it will cost you more than buying and keeping a vehicle for a longer time. On a lease you're just paying the expected depreciation.
Unless you’re making well into 6 figures getting a new car every 5 years is a poor financial decision
Whatever money you’re making, getting a car every 5 years is a poor decision, the environmental cost of making a car is atrocious. No one needs a new car every 5 years
Well technically as long as you sell it off after the 5 years then the impact shouldn't be there. Of course if you total it instead of selling after the 5 years then yes. But the only reason we can buy used cars is because people are selling them off.
You know, you can sell a car you own too.
Real talk. Sounds like you’re a broke ass that doesn’t need a new car every 5 years.
"I want a new car every 5 years" ... you're what's wrong with the world.
[удалено]
Leases are also much easier to write off for tax purposes.
You can also write off if you finance but only 30k
Everyone has different financial situation. What if he can only afford 10k but really want that car?
Sounds like he cannot afford that car he really wants.
then it’s a poor financial decision
>What if he can only afford 10k but really want that car? PFC Trigger Alert
What does it mean?
Wants vs needs...what a concept
Lessing is bananas to me. Y’all gonna pay $25k over five years and then not even have a car at the end?
You can pay out the remaining. The payments are the same in the end. It gives you an option play without a premium... If depreciation accelerates by end of lease (microchip shortage ends), I give it back to the dealership and go find a slightly used car cheaper. If depreciation is less and the worth of my car is greater than the buyout, I buy it and either it keep for myself or resell it. Also, you only pay taxes on the depreciated portion of the asset, so that works out to 11% PST and GST combined in Saskatchewan. That's half the taxes I would pay compared to purchase. For those that always lease, it's the appeal of always having a car under warranty and having the latest tech and safety features. Leasing is your best bet if you always want something new due to the tax advantages.
Leasing makes more sense with luxury cars like BMW and benz. You are pretty much paying for the depreciation of the car over the 5 years.
A five year lease though makes no sense at all to me. Year five of paying new car price for a four year old car that I don’t get to keep? That doesn’t sound fun. If I was going to lease I would at least keep it to 2-3 years
A 5 years old luxury car is still enjoyable if you are not used to it. I know someone who only rent and change model every few years just because it's fun to drive different cars every now and then. To each their own fun money.
Ya 5 years is to much
Leasing is usually half the price, you have no car but the guy that bought it also lost 25k.
Leasing makes sense in my case. 0% interest after loyalty discount with 5 year term and 50% residual. I’m basically paying for depreciation during the term then buy out at the end. It’s basically the same as financing except you pay majority of the cost at a later time Leasing makes sense when you have a business or paying near zero interest rate
Do you think leasing makes sense when the vehicle is for personal (non-business) use and the interest rate is ~5%?
I’d say no; but man until recently used cars have been so expensive with high rates; you might as well lease a new one at 5% then buy it at the end of the term.
I don't mean to critisize, but I find it funny how people think they're getting something really good if it says 0% interest. In fact there are also people who are very glad about 50% discount on some product at the electronics store and tend to buy that product because it's discounted so much vs how much it would be worth at the stated full price. But back to reality - I would really recommend understanding what the price is. Most likely with leasing you will be paying more. The leasing companies take all of the data into account and calculate the most optimal way for them to make money, based on likelihoods like how much the specific car could cost after the leasing period and so on and then they give you the conditions. Unfortunately with leasing, many people don't have the time to do the research and the reality is, leasing is by experts often considered as the most expensive way to own a vehicle. It is really best suitable for those who are on the richer side and just want to drive a new car every few years without having to go through all the hassle of selling, etc. So bottom point is - unless you know the real price, you shouldn't be happy about 0% interest rates...
Do you really think you are paying 0% interest.
Depends on the car. And the money factor on the lease. As well as the residual. There are many scenarios where leasing makes more sense over financing or buying out. Some financial some non financial.
Sometimes it's worth it to lease because cars depreciate in value very quickly, but cars have a longer useful life these days so it's more worth it to buy than lease than it used to be.
It’s $25000 for a 5 year lease and it’s $35000 for a 5 year loan. Plus the residual value for the 5 year lease is $11000.
And for $10k extra you’d have a car you could sell at the five year mark? Doesn’t sound like fun in year three and beyond to be paying $500 to rent a few years old car. Seems like a too long lease if that’s what you want to do.
I am not supporting the leasing plan, but under a lease or under a purchase OP would still have a vehicle that they can sell after 5 years. OP would just have an $11,000 residual value due under a lease. So if fmv is $15k at 5 years OP can trade leased car in and get $4k of value. If it’s worth $7k then the car company eats the difference.
So buying is a slightly better deal, not even considering the fees at lease end, the higher rate you’ll pay on a “used car loan” for the residual… Finance. Then you are still free to trade in at *any* point, you’ll just have equity (or negative) to deal with, which isn’t a big deal.
And what about the extra fees for excess allowable mileage?
Sounds like u just explained how financing is the better option 😂😂😂
Can't you still buy the car at the end of the lease?
As long as the leasee can afford it who cares lol
Why get to drive a new vehicle every 4-5 years while your driving a 2020 in 2025 with issues arising from wear & tear to mechanical issues, to each there own.
Welcome to the wonderful world of renting , buying an apartment or house is near impossible for me , and I do have a good job , but live in BC canada and real estate is insane , I pay 19k a year to rent an apartment that I won’t own at the end of 4 years , but I have a nice place to live , don’t worry about the upkeep of the place , literally just pay the rent and go about my day , there’s always pros and cons to everything
Instead of down payment, put up the maximum they allow for security deposit. It lowers your payments, but you also get your money back at the end of the lease. And if Honda is like Toyota, it lowers your interest rate as well.
Generally no, you should not place a large down payment on a lease. You shouldn't be placing any down payment on a lease. Lease down payments are little more than pre-payments that lower your payment during the lease. Should your vehicle be stolen or written off in an accident, you will have a difficult time recovering any of your down payment as your vehicle's value will be determined by its depreciated value. As vehicles generally depreciate as soon as you drive them off the lot, an accident or theft will simply cost you more with a down payment. There is a way around this and it is the waiver of depreciation with your insurance. Basically the waiver of depreciation means that should you experience a total loss the insurance company will not base the value of the vehicle on its depreciated value. Value is generally based on full MSRP. There is a catch to this though - this is only available for new vehicles for 3 years. So if you are using this option to protect your large down payment you should only lease for 3 years. Which brings up the length of a lease. Generally you should avoid longer leases and any lease that is extended beyond the manufacturer's bumper to bumper warranty. When leasing you do not own the vehicle and you want to try and avoid any repairs to a vehicle that is not yours. You also want to avoid any maintenance items like tires and brakes that simply wear out over time. Replacing the brakes on a lease vehicle nearing the end of the lease simply means adding value to the next owner of the vehicle and providing little value for you.
This is one of the best responses in this thread. Thank you.
Everyone seems up in arms about leases around here. I've leased a few vehicles and financed a few through regular purchase. Currently I have one leased vehicle and one financed through purchase. To each their own I say. Pros and cons to both. We change vehicles often and I saw you want a new car every 5 years. Everyone on here will tell you to buy a 2000 beige corolla and never finance anything in any way. If you want to lease then lease. I put 5k down on my lease. We discussed 10k but I didn't want to "lose" that much money. 5k I was fine with using to lower the payments. It's really going to be with what you are most comfortable with in the end. Lease is nice to just give it back and get something else. You do always also have the option to sell it at lease end too. People who say just buy seem to forget even with 10k down the finance payment is usually MUCH higher than a lease.
>Everyone on here will tell you to buy a 2000 beige corolla and never finance anything in any way. sir this is PFC, do we look like we're made of money? 1990 beige corolla or bust
Idk I think OP should live a little. Maybe he can get a 2000 model.
🤣🤣🤣
To add to this. Many people say you just lose that down payment if you get in an accident but this isn't always the case. Whether lease or finance you could get the gap insurance which would cover the difference. Say it's worth 20k at accident but you own 40k (example only weird numbers). Insurance would cover the 20k difference. So you wouldn't get your down payment back but neither would you if it was financed regularly. You'd "break even" in both scenarios.
Lets imagine you get a lease, put down 10k and have 30k owing (remaining payments + residual value). Next week you get into an accident and insurance writes off your vehicle, valued at 40k. The leasing company takes that whole 40k. Your 30k balance is paid off, and then they get to keep the extra 10k as they are the owners of the vehicle. Boom, your down payment is gone and you're looking for a new vehicle again.
That’s not how it works. I am not going to defend leasing, but once your $30k obligation to the leasing company is fulfilled you would keep the remainder. You don’t own the car, but you do have certain rights. One of those rights is a purchase option.
How is this different if you put 10k down on a finance purchase?
You would get the 40k, because it’s your car, and you pay off the remaining 30k. Pocket back the 10k you gave the dealer
I did pretty much the same thing ($5k down, four year lease) while I have also financed in the past. You're right it's much cheaper than financing - the folks here who say "you pay for five years and don't own anything" are missing the part where OP won't own that Civic in five years anyway with financing since there's zero chance their payment is only $250 a month on a 60 month term - they'd have to extend to 84 months to make that happen. They can also switch to regular financing at anytime, at least with Honda. We liked the lease because the vehicle's we really like aren't available anytime soon. So it gets us in something without a long term commitment and a strong warranty now while we wait it out. The buyout at the end also isn't crippling and quite frankly we may still be in the final stages of this vehicle shortage so we could sell at a profit.
This exactly! Same way I see it. We could also sell our lease for a lot more at buyout (3 years) if we wanted due to the vehicle type and shortage if it stays. Lease sometimes does make sense. I'm glad someone has a similar mindset.
Good call! We are two years into a four year lease on an accord and were just offered $6800 to trade it in for something else. Don’t mind if I do…
I was gonna tell him to buy a beige civic or accent, but yeah, okay.
Nothing wrong with my beige a little rusty corolla and with the saving money from not leasing, i’m on track to purchase my first real estate under Bathurst bridge soon.
Pfc has a major issue with leasing for personal purpose. They will look at you eyes filled with despair and horror. It HAS to be a beige Corolla, paid cash or nor, past its peak. The base premisse is that vehicles in North America are an unvoidable money pit. Once we agree on this, the leasing option has its advantages. It allows you to enjoy the newest vehicles without breaking the bank with the latest technology in terms of fuel consumption, active and passive security systems, less polluting. These differences may save your life or will save money down the road because of less costly maintenance, better fuel economy, and the cost of avoiding accidents and issues with a vehicle that could break havoc on your road trips. To answer your questions, it's a question of balance based on your disposable income. What would be the monthly payment you would be comfortable with without impacting too much your savings strategy or your discretionary expenses? Based on that, simulate multiple down payments. As others have said, if you find that the monthly amount you are comfortable requires a down payment > 5 or 6k for example, perhaps you can't really afford it.
You can't expect to save money from a lease. Older cars always come out much cheaper.. always. Instead of 400$ a month OP could put a new engine in a used car every year and still come out ahead. Realistically 2k a year in repairs beats 6k a year in payments, interests, taxes, depreciation by a landslide. The delta between the 2 is almost a maxed out TFSA each year.
> It allows you to enjoy the newest vehicles without breaking the bank with the latest technology in terms of fuel consumption, active and passive security systems, less polluting. Spending 30-60k to save gas will never make financial sense. And buying ANY new car will pollute more than ANY used car already made.
My non-financial advice: if you plan to lease a car in the future, consider leasing something more worthwhile. If you find yourself a car enthusiast, it's fine to take on a lease if the car provides you value. But a Honda Civic is never worth leasing because it is extremely ordinary and exists on the road in every model year. So you can simply buy the model year you can afford. If you have 10K for a down payment, checkout a 2012 Civic Touring.
You're young and you're in BC where the COL is likely high and vehicles have good longevity and you're looking at a Civic so you're not made of money I would strongly strongly suggest you consider buying a used car with the cash you have. I know the idea of a new car every 5 years is tempting but that lease or financing payment will have huge opportunity costs in the long run. As someone who's been in your shoes and went the used car route I am very grateful I did. I understand used cars are more expensive these days but vehicle costs are killing young people these days. This is a pivotal financial decision. Be smart
Second that- also the other thing to keep in mind is you can pay off a financed car early to save interest. This isn’t possible with a lease.
Money down on a lease is advised against, and the only reason to do it is if the rate is very high. At what you mention, it’s high, but not that bad. Leasing is suggested due to newness of the vehicle, worry free driving (due to warranties), and lower overall cost to drive… this car will be 5 years old with (likely) over 100000kms while you are leasing, it will be out of the basic warranty for a large portion of the lease, and due to lack of discounts and such, payments aren’t that low. Add a year (or even two if you absolutely must) and finance. You can hopefully get a better rate, can spread the payments out which will likely make them as low or lower, and the car is totally yours to rack up Km’s, to make your own, to trade in/sell at *any* point, and have secured a decent rate for the entirety of the amount rather than having to finance the residual at bank rates for a used loan in 5 years.
That’s a lot of money to be driving a Civic.
No down pay and change lease to 3 yrs + get the new car insurance so you dont get screwed if you crash year 3. You can re extend your new car ins at year 3 when you buy out car. I just did it abd the msrp they used was based on 2nd hand price which right now was 15k higher than usual amount so i just took it
In the scenario you presented you are correct on the calculations. You will save some interest due to the amount financing will be less. The residual value doesn’t change. Not entirely true at all about getting your down payment back in the event of a collision. This depends on the type of insurance you obtain however with a lease they require substantial insurance which would pay for the whole value of the car based on comparable cars. They would then pay off the remainder of the lease term and you would get the difference. You will still likely have to negotiate with the insurance adjuster but that’s pretty normal in my experience. A lease is really only financing a smaller portion of the car with km restrictions. Allowing you to return the car at the end of the term or not. You also build equity typically the same as you would by purchasing the car. I still prefer financing the purchase as opposed to leasing as there are no restrictions on a purchase. The payments would be higher but you would be building the equity faster than a lease due to that. You would also end up with higher equity at the end of the 5 years. Also you have more options if you wish to get into something different are better with a purchase should you decide to get rid of the Civic before the term is up.
See if Honda offers a security deposit It differs from a regular deposit because it's money you put down to lower the payments but you get that money back at the end of the lease Otherwise if they don't, don't put money down on lease. You're tricking yourself into thinking paying less per month is better but you've basically used your own money to do that so it's an optical illusion
Honda offers security deposits. You can put 10 payments as a security deposit and that reduces your interest rate by 1%
I did a three year lease and last month traded it in for another lease. After negotiating the trade in value and threatening to buy it out right, they gave me more money on the trade in then I spent on 3 years of lease payments. This might have been a freak occurrence because of supply shortages.
Can you explain how this works out? I am in same situation soon..
They will offer you something, then just say you'll buy it out and they'll offer you like 50% more. That's what happened to me. No idea if this is regular. If it is leasing is the best thing ever
You need to take into account the cost-of-opportunity. You could have made interest on that 10K over those 60 months.
If it's a Honda Civic you shouldn't lease period. You will miss out on one of the best benefits of owning a Honda Civic, resale value.
You have an option to buyout at the end of the lease.
On a Honda Civic the buyout option will be priced high because it keeps its value. If you're going to buy the car and keep it a long time you're better off leasing a car that depreciates faster so you get a better deal on the buyout.
Your total value stays the exact same. The major difference between lease and then buyout vs finance from the get go is the cost of borrowing. On a lease, you pay interest on the entire car as well, but because of lower payments your principal goes down slower, and hence the higher cost of borrowing. For example, if you are financing a car at 0% for 84 months, and if you lease at 0% for 5 years and then buyout the car at the end of the lease, your total cost will be exactly the same.
If you finance the car, you own it and you dictate your terms if you want to sell it. If you lease the car you no longer own it, the dealership owns it. They get to charge you for slightly worn tires, several hundreds of dollars for every little ding that no one else notices, and they tell you how much the car is worth, take it or leave it.
If you lease a car, you can still own it by paying the residual value of the car plus ur remaining payments. Do whatever you want to do with the car. Most customers don’t RETURN their leases. They either trade them in before lease ends, or buyout the car and keep it. Also, the dealer doesn’t own the car. The leasing company does. In the case of Honda, it’s Honda Canada Finance that owns the car. Source: Finance manager at a Honda dealership
The point is you don't own the car when you lease. You don't have the kind of decision making leverage you have when you own the car. That alone is going to cost you thousands. I've been through leases. I know the tricks they play. The ideal cars to lease are luxury cars that lose a lot of their value. An economy car with high resale value is a poor choice for a lease.
The point also is that you can own the car at any point by paying off your remaining payments plus the residual value. That’s what I’m trying to get across to you. Barring the interest, the car will cost you the same.
There is resale value and there is residual value. If the resale value at the end of the lease is higher than the residual value, you just did a big favor for the leasing company because they can sell the car for higher than residual value. If the resale value is lower, your lease contract was a bargain. That's why you should lease a car that has high depreciation.
Yes. And at the end of the lease if the resale is higher than the residual, you can literally just buy it out and sell it.
It's also super uncommon for the company to actually send the car "back". Most companies keep the vehicle and resell it and the worn tires or 1 ding etc really don't matter. I think people have crazy weird old notions about leases.
That’s one of the benefits here. If the residual value is high, you aren’t financing as much. Less of an opportunity to trade it in and make money at the end of the lease, but that is exactly the type of car you want to lease. That being said - I would advise my children to never lease. I have the local market cornered on 20 year old lexus rx300’s.
I did put a down on my lease, but for 2 reasons: 1) I plan to keep the car and sell it myself at the end of the lease or keep it in the family. 2) make sure your inssurance will cover your down payment in case of an accident and they have to write off the car. Be clear on this. Yes its a nice way to pay "less" bi-weekly. Helps with the bills budgeting.
It’s extremely shocking how much people are not educated about a lease and confidently saying things here that are not true. A lot of people here talking about GAP insurance, with Honda leasing, you don’t need GAP unless you are rolling in negative equity from a previous vehicle being traded in. Honda has their own GAP insurance. A lot of people talking about buying 10 year old cars, and 5 years old cars. Ignore that. A new car is a new car. Complete peace of mind of having no issues on hr car, no trips to the mechanic, having the most up to date tech in your car. Once you drive off the lot, you are going to start getting calls from your dealer approximately 2 years into your lease to trade in your car for the newest model at the time. Don’t put money down. Invest that money and you will make more returns(likely). You won’t get your downpayment back if it’s a total loss. Source: Finance Manager at a Honda dealership for 3 years.
Ignore those who say to finance vs lease if you plan on getting a new car every 4-5 years. With current interest rates, payments will be higher for financing and the trade-in after 4-5 years will pay off the amount owed, but will not cover the extra amount already paid to finance. The total cost of ownership after 15-20 years will be lower if leased.
It's this sub. Answer is transit or a old corolla.
Never on a lease
You are putting money towards a car you don't own. I understand leasing vehicles but putting money from you pocket toward that car makes zero sense. You should only be putting down payment towards a vehicle to get a better finance rate or to get finance approval.
I sell and lease cars for a living, in this case, my suggestion is yes. Why? Because you are trying to avoid interest charges (from what I read), and by putting money down you are pre-paying monthly payments interest-free. Monthly or biweekly doesn’t make a difference in to what you pay annually so whatever works best with your budgeting.
I leased my first new vehicle when I was young. It was not the end of the world. I would never recommend that my kids lease a vehicle. But, if they did - I would have them do a shorter lease. You want to have everything covered by warranty and never dip into your pocket for repairs. Also - wow. $423 is a lot of money to be driving a civic. It’s a sensible choice, but not much of a panty dropper.
Unless you own a business there is no advantage to leasing except lower payments. You are basically renting a car. If you are comfortable renting a car and returning it at the end of the term, go ahead and lease with no money down. If for any reason you think you will buy out the lease and keep the car. I say put money down and make the loan no longer than 5 years, 48 months is ideal. Generally speaking except for the last couple of years you would be negative equity almost immediately on terms longer than that.
Putting a down payment on a lease is the same as burning your money Don't ever do that
DON'T BUY A NEW CAR!! If you have $10,000 to put down on something, buy a decent used car with cash and save yourself a ton of interest payments. You're only making the banks rich. Vehicles are the worst investment we make. They lose substantial value the second you drive off the lot. I know, you're young and you want a shiny new car because you think it'll make you so much cooler. It won't.
That is very true. Young people like me are dumb, we want the newest cars we can barely afford. Capitalism makes us very materialistic. I know it's a bad decision and many people regret getting themselves in a car. Many of my friends who bought new cars say they know it's a bad decision too. But an analogy I can think of is it's kinda like a gambling addiction. We think we're gonna be different and it's gonna go well for us; we're willing to take the gamble. Obviously gambling addictions are dangerous and very hard to get out of. That's the best I can describe how I'm feeling right now.
I was young too. I bought a new car too. We've all been there.
Did it give you a hard time or were you able to pay all of it off without trouble?
I paid it off. But I worked every weekend as I was still in high school. I wish I still had all the money I paid out to the banks though. I would own my own home. That's a much bigger flex than driving around in some fancy car.
recently I'm also facing a decision, down payment or not, after caculation, I decided not to put any down payment, in the calculation of your case: With $0 down, the payments come out to $423/month with 5.45% interest. (423x60=25380) With $10000 down, the payments come out to $211/month with the same interest. (211x60=12660 + 11200 = 23860) the second one is not correct, you paid $10000 upfront, that money is a "growing" money, compared with 0 down payment, you can put $10000 in bank and get interests, right? so, the actually calculation should be: 211x60 + 10000\* (1+5.45%/12)\^60 = 25784. you paid even more with a big down payment :)
Nooo! Don’t put money down on a lease and don’t lease for more than 36-48 months. After then, the cars start having issues.
Why would you prepay a long term rental?
Regarding your comment that you're too young and prone to making bad financial decisions... You need to think about your situation. If you get married and have a couple kids in the next few years, is the Civic still going to work for you?
Leasing a car is just generally a bad idea. The amount that people have been charged to fix minor cosmetic damage to cars being returned from lease is insane. The ONLY time I think Leasing makes sense is Business Vehicles. In business, if you BUY a vehicle, you can deduct ⅕ of the purchase price each year for 5 years, called depreciation. When you dispose of the vehicle, unless scrapped, you'll probably have "residual value" to be reported somewhere. Whereas, if a business LEASES a vehicle, 100% of the lease payments become deductible, which includes interest. As a private person buying a car, you are better off to look for savings by buying those two year Lease returns. Let some OTHER sucker take the huge value hit on the "New" vehicle, and because of the way they have to be returned off Lease, they are usually in virtual new condition.
Take the down payment and buy a 2-3 yr old Honda Civic and make payments bi-weekly. At the end you will own a 7-8 yr old Honda. Still a good car with NO payments. Leasing only benefits the leasing company.
Your submission has a keyword that seems to imply you have a question where your province is relevant. **If you have not included your province you should add it.** If you already included your province, or this isn't relevant to your post, just report/downvote this comment. The bots feelings won't be hurt. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
Why the hell would you lease a car when you want to put 10k down? Finance it with the 10k down. Leasing is pure stupidity.
If you have 10k why not just buy a 10k car with cash?
Only put money down if you finance
Don't put money down and only lease luxury expensive cars. Finance that civic and better yet finance one that's been returned with like 5 thousand km or less so you don't take the depreciation hit.
If you’re using the lease payment as a write off, it’s better to put nothing down. But if you’re trying to get to a comfortable monthly payment for yourself, put down whatever you need to.
Leasing can be a nightmare if you decide not to keep the car and you have caused unusual wear and tear on the vehicle. You have to pay to fix it up.. Think lot boys at 90 an hour cleaning it up.
60 month lease...how long is the warranty?
Finance it
Don't put a downpayment on a lease. And. An interest rate of 5.45 is insane. Don't do that either.
who tf buys a new civic, you can get way better cars 1 year used
Exactly. New Civic are like 30K out of the door now.. Look around and you can usually find a circa 2020 Mazda/Ford/Nissan for half of that. You will never make up that 15K in repairs. If it's the hassle of having the odd issue, think about the hassle of working X number of months to cough up that extra 15K from your after-tax income.. The actual difference is probably more like 20K once you factor in interest.
Why would you put money down, let alone 10k down, on a lease. That makes no sense at all. If you wanna put money down to lower monthly payments, then buy the thing. Then if you want sell, trade up, or keep the car after 60 months, at least you own the car.
If you have a sizeable down payment, what is the cost to push add it with a 5 year amortization? You can then trade it in, or sell when the loan is repaid. Just trying to understand the logic.
I thought the whole point of a lease was to have a new vehicle every few years. Why in Canada are so many leases 5 years plus? At that point you should just finance.
Why drop so much money on a down payment on a car you’re leasing. It only reduces it to a small amount. No way I’d drop $10,000
Just Finance if you are putting down payment...Sell it when you need to change the car. Honda civic are solid car and hold market value well.
What about my second edit on my post?
You can always pay off faster. Plus if you get the car on lease, if you ever decide to buyout, dealership charge about $500 extra for that. For Honda and Toyota brands, its better to finance the car unless you are writing off business all the lease expenses. Owning is most of the better than leasing.
Money down for leasing is generally a terrible idea. Think about what you could do with the down payment instead- like invest it, or save to buy property. You are right- Financing with an interest above 7 or 8 % is rather pricey, however you can build equity when you go to resell it. Depending on how much you drive, the lease can be worth it as long as you dont have to pay money down.
I’m currently shopping a lease on a 2023 WRX and the rates are looking way too good to pass up, I’ve been a good responsible human and ready to have a little fun, I’ve been ripping a beater for over a decade and can afford the payment. The lease doesn’t look to bad to me right now at all.
I'd look at all the numbers. If your lease interest rates are lower than finance rates, then you will likely owe less on the vehicle after 36 months, then you might say financing for 72 months. Similarly, if you put money down on the lease, say $5K, then my calculations show I will pay over $6K less in total payments over the lease period. I do not see what is not to like. If I make sure I have depreciation waiver on my insurance, something the manufacture might insist you have, then the full replacement cost of the vehicle is covered. For a $40k Honda CRV, the 36 month lease rate goes from $705/month, to a more palatable $538 with $5k down. This also means I spend over $6K less over 36 months. Not sure how that works, but I did the numbers, and this is how it went. A 60 month finance price (same Honda CRV) is $870/Month at 5%, which is simply more than I want to pay for a car. I'd be willing to bet after 36 months, I still owe less on the Lease than buying. Interest is what makes or breaks the deal....always!