In the course of my nearly 20 years of practice, if there’s one question that I have come across more than any other with past clients, family acquaintances, and colleagues is whether to buy or lease a vehicle. The answer, like so many questions in my line of business, is “it depends”.
When I was in the CA program in British Columbia, they taught us a very important approach to answer questions. Find out what the client’s needs are, provide different options and outline the pros and cons of each option and then most importantly, make a recommendation based on what the client has told you about themselves. This is why articles on the web often won’t suffice because they don’t factor in your unique circumstances which are so critical in making an informed decision. This is why a 15 minute phone call with Agustus Tax Counselling is so valuable.
Going back into our buy vs. lease example, here are a sample of factors to consider before you make a decision. Please note, the right decision for you will not just be about money!
1) Are you a good negotiator?
This is critical as I have noted some people are better than others at bargaining. I have never liked bargaining either at the outset at the dealer but more importantly on the sale of a car. Therefore, I am likely losing thousands of dollars at purchase and resale not to mention I thoroughly dislike convincing others of what my material asset is worth.
2) How often do you change your mind on a significant purchase?
I personally commit to an asset once I’ve purchased it and never look back. If you are a type that everything looks great when you test drive but then if you subsequently note flaws in the car then how much will that bother you? If a lot then leasing might be better, if a little then buying might be better.
3) Insurance limitations
Many people don’t know this but there is no insurance in Canada that I am aware of that will cover the loss of value of a car after it’s been in an accident that you make a claim on assuming that the car is NOT a writeoff. In British Columbia (like other provinces), if the claim is above a fixed dollar threshold ($2,000 in BC) then the vehicle will forever have the tag as a vehicle that has been in a significant accident. Referring to bullet point (1), this provides great leverage for used car companies to point this out and start at a much lower offer for your damaged vehicle. With a lease, this is not an issue and becomes a burden on the lease company or the dealer depending on your contract.
4) Check-in after a lease is over.
I have leased two vehicles in my life and both times the return process is a time where the lease agent will try to point out every minor scratch upon return to try to get some extra money at the end of the lease. Some dealerships offer an insurance to cover minor scratches but my experience has been that the definition of a minor scratch is different depending on who you talk to. As much as I would like to lash out at this process, it’s just the way business is done and therefore should be factored in when you make a decision.
These are just some of the factors to consider when faced with the lease vs. buy decision. Other factors like purpose of vehicle, business use, mileage expected etc. should also be factored in. To research and read this over the internet would take a lot of hours to get educated sufficiently to make a decision not to mention the articles have still not connected with your unique circumstances. Alternatively, one 15 minute phone call with an Agustus Tax Counsellor would probe the issues that are important to you in making an important financial decision like this.