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The SUV's latest victim: Leasing

GREG KEENAN

From Tuesday's Globe and Mail

Latest comment posted at 3:52 PM EST 31/07/08

The way vehicles are sold in Canada is about to undergo a sweeping transformation ...Read the full article

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  1. Steve Not an Alberta Redneck from Calgary, Canada writes: When you can get a 2007 SUV for $3,500, why lease?
  2. Joseph Whistle from Canada writes: Zero percent financing is total B.S. Always has been always will be.
    Ask them how much cash back you get if you pay for the car flat out, and you'll see the exact amount that you REALLY would be paying right upfront if you chose their so called zero percent financing.
    You'll pay all the interest right upfront without the benefit of saving that interest by paying off the car faster.
    It's one of the biggest scams in the industry, and the domestic car dealers have been doing it the most.
    Look for the cash back you'll get if you don't pick their "financing". It should be called the scam factor.
  3. John Stewart from Eden, Ontario, Canada writes: Now that the lease rush is over, perhaps the Canadian list prices will get in sync with the US, instead of being 20% higher.
  4. Gnarly Kanuck from Canada writes: "Buy what appreciates...lease what depreciates"

    - John D. Rockefeller

    Does anyone really think leasing will die? How will GM move the number of "Volt" electric cars necessary to save the company?
  5. George Levecque from Fergus,Ontario, Canada writes: This change in selling vehicles was forecast last week on most USA Blogs! I too have never leased and just made an outright purchase. Leasing is for people who can write off the expense, most of us who are retired and not working cant!
    Lets face it, with Leases that where made a few years back, the Buy Back is mostly higher than is a "new vehicle now"
  6. D P from Oakville, Canada writes: Hey Joseph Whistle, you are right to some degree and more so in the past but these days these guys are offering both 0% and cash back, just make sure to ask.
  7. Not left,right or centre but forward got it from Toronto, Canada writes: Lease rates, zero interest loans, cash back and all the likes are simply ways to distort the true cost of cars in the mind of prospective buyers. The point is the cars and the associated costs are becomming increasingly out of reach for average families. The boom in leasing was because it was the only way a middle class income could afford such an expensive car. For those who know the value of a dollar, get out of cars (or buy cash the smallest thing you can) and buy a bus pass.

    8-10 year financing is bank-speak for "you can't afford this". It is no different than 40 year mortgages. When will people learn?
  8. Norm Albert from Canada writes: Along with the goose that layed the golden eggs(ie leasing) the government will now have to look at those residual taxes they were getting every month on leased vehicle. Let's face it the government gets 13% on every vehicle sold in Canada, new or used. Will that be lump sum or lease?
  9. Allan b from Haliburton, Canada writes: I wondered when leaseing would coulapse as a way of perchassing a vehical. It only ever helped those people that were in buisness to write off some of there profets. Ordinary people should never have gotton involved with leaseing in the first place.
  10. Stan L from Canada writes: Well I lease a vehicle....I lease it as you guessed for work. My place of business insisted I own a vehicle as my Clients that I visit are pretty far flung. I lease becuase using the car is something I only do for work...I don't even use it to commute (oddly enough I walk to work) Leasing affords me the opportunity to write off that expense (that I wouldn't have had otherwise) on my taxes.....sadly I have always supported GM becuase of a family connection....guess my next lease will not be one of the North American makers.....
  11. Unabashed Opinion from Toronto, Canada writes: There will likely be an indirect effect of reducing the number of larger, heavier, less fuel-efficient cars on the road, when fewer people can afford to acquire them through the leasing option. Perhaps the current crisis will begin to change the view of vehicles as equivalent to status or manliness. Then again, the fact that one can afford to fill up a tank with gas might soon become a sign of affluence and profligate spending.
  12. T M from Toronto, Canada writes: For the record, one can "write-off" an owned vehicle too! Leasing is not the only way. On an owned vehicle, it's called Capital Cost Allowance (CCA) on your tax return. Talk with your accountant.

    The benefit of leasing is simple. You don't own the vehicle, so you only pay a pre-determined monthly amount for use of the vehicle, for a pre-determined time period. Therefore, it is less cash flow per month than financing a vehicle for the same period of time. Basically, leasing is a way to drive a car you cannot afford to buy. That's the essence of leasing!
  13. dave charlston from toronto, Canada writes: it was always a stupid way to buy a car and by far the most expensive. Glad to see it go
  14. Stan L from Canada writes: T M from Toronto, Canada writes: Basically, leasing is a way to drive a car you cannot afford to buy. That's the essence of leasing!

    I wouldn't say so...leasing for me is a way to drive a car that I had no intention of buying the first place. And for the record IF I wanted to actually own the vehicle I could afford it, but the number tumble out for me better this way (I lease a small gas efficient sedan) I am sure I am not the only one in this position of leasing for work.
  15. Patrick Hanlon from Calgary, writes: The American automakers, consumers and the government have been ignoring reality for ages and their hardships of late are of their own making. Jimmy Carter advised the public in 1979 that the country had to get over its addiction to oil and the country buried its collective head in the sand. The American automakers flirted with electric cars at the start of the decade but then essentially did a mob hit on the idea. Apart from the pace at which American cars consume gas, not to mention depreciate, the real failure of the American automakers is to innovate their cars in a manner that allowed them to maintain and nurture and industry that WAS a vibrant part of the American economy. They have steadfastly refused to acknowledge the times they live in and are suffering accordingly.
  16. M D from Canada writes: ...replacing leasing with a 72 month financing program....ya right. Wait to see the problems they'll have in 4 years.
  17. Doug Wood from Canada writes: A lot of people seem to think that leasing is dumb for a consumer. Try telling that to someone that just returned a truck that is worth $15K but has a $30K buyout. That person has been paying a lot less to drive that vehicle for the term of the lease, and they left the residual risk to the finance company. Not such a bad deal for the consumer then.
    Funny that GM and Chrysler don't even want to buy their own products!
  18. Mark H from United States writes: "In 2002, for example, four-year-old full-size pickups were selling for, on average, 57.2 per cent of their original manufacturer's suggested retail price. As of this January, residual values – or the forecast value of the vehicle when the lease ended &8211; for four-year-old pickups had plunged to just 32.3 per cent of the original price"

    What that tells me that there are alot of loaded low-mpg vehicles out there. Part of it is perception; you've got to burn ALOT of gas to make up for the extra money you'd pay for a new car. A new 30 mpg car may not pay off compared to a $12K, used, 17 mpg SUV in the long run. At least that's the situation I've run into. If you drive 10K miles or less in a year, it doesn't make any sense to buy a new car. Just get a 3-year old Jeep and pay for the gas, you'll come out ahead in the long run.
  19. T M from Toronto, Canada writes: Stan L. - I stand corrected. You are right. There are consumers that don't want to the risk of ownership for long-term maintenance issues, and would prefer the fixed monthly cost of leasing a car that is new and covered by factory warranty. In that case, I see you're point.
  20. Alistair McLaughlin from Canada writes: If Canada's retarded banking and financial services act ever gets reformed, maybe we'll finally get rid of the stupid rule that keeps banks out of auto leasing. If the banks were allowed to lease directly to the public (instead of having to create pseudo-leases such as the Royal Buy-back program at RBC), the consumer would be looking at more leasing options now instead of fewer. In the late 90s, the last time anyone seriously looked at banking reform, the Big Three along with the CAW lobbied fiercely against any incursion into their territory by the banks. Now they're reducing leasing options, and consumers have nowhere else to turn. In Canada, everyone has their own protected little fiefdoms. While we serfs are told these "protections" are for our own good, they really benefit only those who lobbied for them in the first place.
  21. Outlier in Calgary from Calgary, Canada writes: I think it is telling that even the big three don't want their own vehicles back because they know they are nearly worthless.
  22. Alistair McLaughlin from Canada writes: I should add that even allowing banks to enter the auto leasing business won't change the fact that depreciation rates on gas-guzzlers have increased, thereby making the prospect of leasing a new one more expensive. No one, including the bank, is going to lease to you at a loss.
  23. The Natrix from Toronto, Canada writes: "Stan L from Canada writes: Well I lease a vehicle...."

    You are one of the few that do it right. Others just lease thinking/intending to use it like they own it.

    Then they realize the ongoing payments with the prospect of nothing back in return. Or that they are over the mileage allowance limit, and will then have to pay a huge fee.
  24. Stan L from Canada writes: Perhaps if the automakers were a little more jduicious in how they handed out leases in the first place, we wouldn't be in this mess. As I said, I lease for work, my lease is due, the car I am giving back to the dealership is 3 years old, has less than 20K kms on it and has only had a mirror replaced....someone is getting a very good deal when they buy this car used.
  25. Robert Boyd from Windsor, Canada writes: then they can make it up in volume, oy!

    "Alistair McLaughlin from Canada writes: ..No one, including the bank, is going to lease to you at a loss."
  26. Mario I from Montreal, Canada writes: I noticed when leasing was getting very popular in the late 90's that price dealing (negotiation) was a starting to be a thing of the past with the big 3.

    The guys was telling me, why should I lower the price of this car when a young family will lease it in two days., it going out of the car lot in a few days Plus they had a special commission for leasing.

    Can wait what are they going to do next. Not much else they can chop now.
  27. john deere from Canada writes:

    Robert Boyd gets comment of the day for "then they can make it up in volume, oy!"

    That is why Honda rules in the bear markets and I doubt that Honda will stop leasing cars. lmao.
  28. RD Lone from Vancouver, Canada writes: The debt junkies are going to go into withdrawal!
  29. Another Option canada from Canada writes: The Big three where caught in a catch 22 on this Issue big money to be made on the truck sales volumes as long as the residual values holds up on the lease returns. Now the Residual is gone.. If leases go. Allot of buyers will be going as well. So to offset the long payment terms they better start improving the warrenty and build quality. Who wants to sign up to a lemon for 8 to 9 years because cars makers have priced themselves out of reach of the average consumer. Hard part for the Big three meaning (maker of big vehicles) is there is 3 to 4 years of trucks out there to come back ... My Dad taught me when I was a kid to buy used cars let some-one else take the hit and pay as much cash up front. Thanks Dad
  30. Justin Payne from Richmond BC, Canada writes: Not left,right or centre but forward got it from Toronto, Canada writes: 8-10 year financing is bank-speak for "you can't afford this". It is no different than 40 year mortgages. When will people learn?.....

    I had no idea that one could finance a vehicle for 8 or 10 years. Not really sure who is more foolish, the bank or the customer. And by the way I got a big chuckle on the " bank speak for, you can't afford this." You nailed it.... LOL
    Regards
  31. If I had a million lobsters from Halifax, Canada writes: Finally, i was wondering when this would happend given the fact that these leasing firms can't sell the tranches of leases anymore on the open market.

    The great thing is it'll make buy cars for transportation as apposed to buying them for vanity. It put lots of people over the top in terms of costs per month becuase they wouldn't buy what they needed - they bought what they wanted. The banks will ensure they can actually afford them by qualifying for the loans they'll have to get.

    Funny story, I drive an old Kia around town for work and such. Anyway, a guy in bimmer rolls up to me and says what a piece of Sh... Anyway i said at least I own mine. He drove away and gave me the finger which tells me that he's essentially broke and uses the car to make himself feel better.

    All in all socially a very good day.
  32. C. Fletcher from Canada writes: I think Doug Wood's post above hit the nail on the head as far as I am concerned. Contrary to popular belief as expressed in a lot of the posts here, a lot of people who lease do so for very smart reasons and not because of vanity or desire to drive a car they can't afford. Au contraire...

    Read Doug Wood's post to understand:

    Doug Wood from Canada writes: A lot of people seem to think that leasing is dumb for a consumer. Try telling that to someone that just returned a truck that is worth $15K but has a $30K buyout. That person has been paying a lot less to drive that vehicle for the term of the lease, and they left the residual risk to the finance company. Not such a bad deal for the consumer then.
    Funny that GM and Chrysler don't even want to buy their own products!
  33. K D from Canada writes:

    I wish GM would just lower prices to near U.S. prices. All the American cars coming into Canada are killing re-sales. I want to buy a Saturn Aura but the used are so much cheaper, 1/2 of them are U.S. cars.
  34. Rick Luzzi from Canada writes: Leasing in Canada last year, accounted for 42% of total sales. Asian and German automakers are salivating at the thought of increased sales. GM, Ford and Chrysler have put the final nail in their coffin. All North American car owners might want to park their car in the garage, they just might become collecter items.
  35. Grim Reaper from Kitchener, Canada writes: In response to If I had a million lobsters, I said "move that piece of sh.. " I gave you the finger for driving slow in the passing lane and btw I own it.
  36. Mitchell Jay from london, Canada writes: I've leased 3 cars from GM Over the past nine years and never had any major issues with my cars. Leasing worked well for me as I walked to work and didn't want to keep my car past 3 to 4 years. GM even had to cut me money back as they sold my car for more of the buyout value. This just blows me away that leasing has ended for the big 3 and we are looking at longer amortization periods for purchasing a new vechicle. Who wants to own a car for 7 years. A sad day for GM as more of there customers will be looking at other alternatives such a foreign cars.
  37. Hullboy Hullboy from Ottawa, Canada writes: I can not understand why big 3 are crying.
    I lease a car that originally cost as new 22 000 $.
    A pay 378 a month * 48 months = 18 144. When I return the car most likely there will be small damage here and there that will cost additional 500 $.
    22 000 - 18 144 - 500 = 3 356 dealer has to sell 4 years old car 80 000 km for 3 356. I believe dealer will sell it for more.

    What that means?
    No cash in the manufacturer acount.
    For this point of time manufacturer prefer that customer borrow money from bank and get those 22 000 $ today.

    Leasing will be back as soon manufacturer has more cash.:)
  38. 1000 Crabs from Grsinville, N.B., Canada writes: Grim Reaper from Kitchener, Canada writes: In response to If I had a million lobsters, I said "move that piece of sh.. " I gave you the finger for driving slow in the passing lane and btw I own it.

    1 Million: You're totally right, but no welcome
    signs in Kitchener for you. It would seem that
    both GM and you are fabulists, o.k., carry on.
  39. Never Wrong from sunnyvale, Canada writes: one key problem with leasing is that many ignorant customers don't realize that they could and should negotiate the upfront price (Purchase price) AND the residual price. Most idiots just walked in with a monthly cost they wanted to pay which let the dealers, manufacturers and finance co's maximize their profits.
    Read Lemon-Aid to understand how it really works.
    I leased my first Honda b/c I needed a low monthly pmt and the int rate was competitive at the time. I still haggled over the price of the car and the buyout and wound up buying it out at a fair price.
  40. Luc Delorme from Canada writes: Mitchell Jay: there are many people that own their cars far more than 7 years. I probably wouldn't want to own an American car that long because the repair bills will start adding up, but I plan to keep my Nissan for 9-10 years (it's almost 6 now). By that time, I will have been driving payment-free long enough to save up enough money to buy it's replacement cash up front.

    Resale values aren't that great, so why not just drive the car until it becomes unreliable, and not worry about resale values.
  41. Sullivan McGriff from Edmonton, Canada writes: Note that the long term financing is not offered by banks directly but through their 'dealer finance' arms so the real price of the vehicle and interest rate are obscured by cashback, commissions, rate buydowns and whatever. There are only so many dollars on the plate so they have to be apportioned to all parties benefitting. The real issue is the residual value, neither the manufacturers or banks are willing to estimate what it will be, so they dump it all on the consumer, the Chrysler rate of 11.5% makes that clear.

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