First Time Ford Buyer
Financing Options - Lease or Buy
The choice between buying and leasing is almost as important as choosing the vehicle itself. Which one you choose depends on your specific needs, and financial resources.
To help you choose between buying and leasing, you can start with this Buying and Leasing Checklist to find out which option is better for you.
If you intend on simply using a vehicle for a few years, then leasing may be for you. Leasing provides you the opportunity to acquire a more expensive vehicle or more equipment for the same monthly payment as if you had financed the vehicle over a longer time period. You can also change into a new car more often.
If you will be traveling long distances in your car, if you intend to modify it, or if you're using it for work where it will be subjected to harsher-than-normal conditions, then buying may be better suited for you.
Buying Explained
When you buy a vehicle, you pay the full purchase price up front, including taxes and licensing.
Because you own the vehicle, you are free to do what you want with it. You can modify the vehicle, you can drive it as far as you want, with no mileage restrictions, and you're free to keep it, sell it, or trade it in for a new vehicle.
Unless you have the entire sum of money, you will have to Apply for Credit; Ford Credit offers this service on the Web (select a vehicle of interest and go to the "Shopping Tools" section to access the "Apply for Credit" link). Many financial institutions allow you to get pre-approved financing even before you go car shopping—worth investigating once you've decided on a budget.
Note that because you're paying for the entire vehicle, and not just for the use of it like leasing, the monthly payments (and interest) will be higher.
Leasing Explained
Once you understand the basics of leasing, it's not as complicated as it seems.
When you purchase a new car with traditional financing, you agree to pay off the vehicle over the life of the finance contract, plus interest. When you lease, you pay for the use of the vehicle, rather than the whole vehicle plus any leasing charges.
Lease terms vary from 24-48 months. At the end of the lease term, you can either:
- Return your vehicle and lease a new one
- Purchase the vehicle at a predetermined price and keep it, or
- Return the vehicle and walk away
Your monthly payments are calculated using the car's residual value, which is an estimate of what it will be worth after the term of your lease. For example, if a car costs $20,000 when new, and will be worth $8,000 after you use it for four years, your payments are calculated using the difference between the two—$12,000 over four years.
Many people believe that leasing and high mileage don't mix; this is a common misconception. A Canadian Road (Red Carpet) lease can be tailored to meet most people's needs.
Whether you purchase a vehicle or lease it, there's always a price to pay for high mileage. With a lease, you know up front what additional miles will cost in terms of added depreciation.
Because you're paying for the use of the car or truck, you do not own the vehicle when you lease it, and it may be subject to certain restrictions, such as the mileage you can drive every year (usually 20,000 or 24,000 km, but higher limits are negotiable). You also cannot modify the vehicle and are responsible for the cost of above-average "wear and tear".
Another advantage of leasing is that you don't have to deal with trading in or selling your old car because you are not guaranteeing the residual value.
Should I trade in my old car or sell it privately?
Though it's commonly thought that you'll be able to sell your old car privately for more than your dealer will pay there are some important things to consider. Selling your car yourself takes extra effort and time, from preparing the car, presenting it and dealing with many prospective buyers.
In addition, if you trade in your vehicle, the trade in value is subtracted from the cost of your new car or truck before taxes.
