Automotive

Lease terms 48 vs 60 month and other costs?

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  • Sep 25th, 2017 6:54 pm
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[OP]
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Jun 21, 2008
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Lease terms 48 vs 60 month and other costs?

My general research already tells me that it might look cheaper at first but a 60 month lease term, while giving you lower monthly payments, actually ends up costing more as far as needing a security deposit goes and obviously a higher total cost into the life of your lease (ie. You pay an entire year extra towards the car).

Is there any scenario where there is an advantage to a 60 month lease term vs a 48?

Also - for those extended warranty packages and other "special coverage" packages they try to upset you on, are those ever worth it?

Also is it standard for dealerships to offer a "gap insurance"
22 replies
Member
Aug 18, 2017
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Hi,

Term shouldn't affect security deposits. If the payments were noticeably lower on 60M then it would make sense. Preferably 36M or shorter is better if it makes sense as you would likely avoid paying for brakes and tires and the higher cost maintenance at the dealership. GAP should be on pretty much any lease as standard. I wouldn't be buying anything at all other then maybe wear and tear pkg if your previous vehicle has lots of dings / scratches, rim damage etc. Wear and tear doesn't usually cover windshields.


Every vehicle is different and there is no blanket right or wrong answer. You need to compare interest rates for the different terms and the residual % / value for each year. There will usually be a sweet spot. Personally if a 36M lease was 30-40 more per month then a 60 month lease I would opt for the 36 as I wont end up paying crazy $500 service packages and wont pay tires / brakes etc.



If you let me know what vehicle, trim, KM / year, I may be able to give a better idea.
[OP]
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Jun 21, 2008
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NathanT039266 wrote: Hi,

Term shouldn't affect security deposits. If the payments were noticeably lower on 60M then it would make sense. Preferably 36M or shorter is better if it makes sense as you would likely avoid paying for brakes and tires and the higher cost maintenance at the dealership. GAP should be on pretty much any lease as standard. I wouldn't be buying anything at all other then maybe wear and tear pkg if your previous vehicle has lots of dings / scratches, rim damage etc. Wear and tear doesn't usually cover windshields.


Every vehicle is different and there is no blanket right or wrong answer. You need to compare interest rates for the different terms and the residual % / value for each year. There will usually be a sweet spot. Personally if a 36M lease was 30-40 more per month then a 60 month lease I would opt for the 36 as I wont end up paying crazy $500 service packages and wont pay tires / brakes etc.



If you let me know what vehicle, trim, KM / year, I may be able to give a better idea.
Thanks

Toyota Corolla LE CVT, 2017 - 20,000km/year.

It's 0% interest on 48 vs 0% interest on 60 with a $1200 deposit.

The difference was about $28 between the two in monthly payments.
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Ticco wrote: Thanks

Toyota Corolla LE CVT, 2017 - 20,000km/year.

It's 0% interest on 48 vs 0% interest on 60 with a $1200 deposit.

The difference was about $28 between the two in monthly payments.
How much is the lease? Toyotas normally hold tremendous resale so you might get a better deal financing, as the residual will be much lower than actual value. Normally people want to lease things that rapidly depreciate and have high potential for issues down the road, so they can just turn them in after the term and be done.
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Aug 18, 2017
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Looks like interest 0.49% at 60M - using Ontario build and price calc. I worked at Toyota for 3 yrs, no one ever needed to put a security deposit.( Toyota.ca is saying $872 down on delivery, so its possible the security deposit is mandatory but I doubt it).


Personally I'd be looking for a deal at 0 down (no security deposit), roughly 242 a month ( or 112 b/w), final selling price of $21105 roughly tax incl (13%) ($1500 factory incentive) ( $1000 ) discount and this is adding a $500 admin fee not put on Toyota.ca. If you want to really haggle I'm sure you could squeeze out an extra $200-300 discount and waive the admin fee. Wear and tear program should be $745


don't pay for security etch or any other bogus fees
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Personally I would not lease a car past it's warranty period. You may be on the hook for any mechanical issues, wear and tear when the lease is over. Chances are higher when the car gets to 60 months.

Also your planning to lease a corolla. Those are known to be one of the most reliable cars. I would just finance it. Resale value should be strong as well.
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Feb 19, 2017
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The big expenses you save with the lower lease term or new tires and new brakes. With winter tires and low kms, the tires *should* last 48 months depending on their quality, but 60 months can be pushing it. If you don't drive hard and the brakes are quality, there's a chance you'll be good for 48 months there as well. Personally I think 48 months is the sweet spot - there's usually a big dropoff in monthly rate from 36 to 48 months.
[OP]
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50centdollars wrote: The big expenses you save with the lower lease term or new tires and new brakes. With winter tires and low kms, the tires *should* last 48 months depending on their quality, but 60 months can be pushing it. If you don't drive hard and the brakes are quality, there's a chance you'll be good for 48 months there as well. Personally I think 48 months is the sweet spot - there's usually a big dropoff in monthly rate from 36 to 48 months.
Would you buy their wear and tear insurance (ie. coverage for anything beyond normal wear and tear when you hand the car back at the end of the lease)?
[OP]
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FirstGear wrote: How much is the lease? Toyotas normally hold tremendous resale so you might get a better deal financing, as the residual will be much lower than actual value. Normally people want to lease things that rapidly depreciate and have high potential for issues down the road, so they can just turn them in after the term and be done.
We thought it'd be easier to just lease and hand it back lol

You're suggesting it's better to finance and then re-sell it?

How do we resell it? Privately or back to the dealership?
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Ticco wrote: We thought it'd be easier to just lease and hand it back lol

You're suggesting it's better to finance and then re-sell it?

How do we resell it? Privately or back to the dealership?
That's what they're counting on to make it more expensive. Lol

Remember at lease end you get no car. Finance end, you do. So you'd have to compare if it's worth the extra money to lease. Usually the lease is more expensive as even though the payments may be similar as finance (usually it's actually higher), at the end of the lease term you have 0 equity, while at the end of year 4 in the finance term, you'd have some equity. But leasing is the least headache as after warranty is gone you just trade to the next new thing and forget about it.

Privately gets you a lot more than trading back in to dealer. But it is the most hassle.
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Ticco wrote: We thought it'd be easier to just lease and hand it back lol

You're suggesting it's better to finance and then re-sell it?

How do we resell it? Privately or back to the dealership?
You can sell your lease too just like you can sell a financed car. There is 0 difference as you have to cover the remainder of the balance in each case. So don't let that be the decision. I just sold my Toyota lease early as I had lots of equity in it. Now, if you know that you don't want the hassle of paying it out, posting it, dealing with all sorts of kijiji tire kickers, lease and return is the easiest.
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FirstGear wrote: That's what they're counting on to make it more expensive. Lol

Remember at lease end you get no car. Finance end, you do. So you'd have to compare if it's worth the extra money to lease. Usually the lease is more expensive as even though the payments may be similar as finance (usually it's actually higher), at the end of the lease term you have 0 equity, while at the end of year 4 in the finance term, you'd have some equity. But leasing is the least headache as after warranty is gone you just trade to the next new thing and forget about it.

Privately gets you a lot more than trading back in to dealer. But it is the most hassle.
IMO, equity shouldn't really be a factor when deciding financing vs leasing because you paid for it. Leasing is basically paying for depreciation so that's why payments are lower. When you finance, you pay depreciation and the remaining equity of the car. If you were to buyout the lease at the end, then effectively it's the same as financing (pay more though through interest if you have to finance the buyout). As car manufacturers are pushing leasing options, many times it's more favorable and rates are lower than financing.

Another thing is, you can technically build up equity in a lease car. If the residual rate is lower than market value, just sell the car and pocket the extra change. My friend did this with a BMW 135. Sold the car with 3 months remaining and the buyer cut two checks for dealer and for seller.
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bomber17 wrote: IMO, equity shouldn't really be a factor when deciding financing vs leasing because you paid for it. Leasing is basically paying for depreciation so that's why payments are lower. When you finance, you pay depreciation and the remaining equity of the car. If you were to buyout the lease at the end, then effectively it's the same as financing (pay more though through interest if you have to finance the buyout). As car manufacturers are pushing leasing options, many times it's more favorable and rates are lower than financing.

Another thing is, you can technically build up equity in a lease car. If the residual rate is lower than market value, just sell the car and pocket the extra change. My friend did this with a BMW 135. Sold the car with 3 months remaining and the buyer cut two checks for dealer and for seller.
That's if the lease and finance cost about the same, and you were to sell the vehicle after. For a lot of vehicles the lease payment is more (interest , residual) and most people don't actually sell their vehicles after.
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Ticco wrote: Would you buy their wear and tear insurance (ie. coverage for anything beyond normal wear and tear when you hand the car back at the end of the lease)?
I personally would not, at least if I'm leasing a car with good resale value. In that case if the dealer's giving me a hard time on something, I can just buy out the residual and sell it myself, or trade it in elsewhere. But it really depends on what kind of driver you are and how often you drive.

The appeal of the 3-4 year lease to me is not having to pay extra for warranty coverage, avoiding major maintenance expenses, and always driving a newer vehicle. Plus I always have the option to buy the vehicle at lease-end if I really like it. Paying for wear and tear insurance counteracts that.
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50centdollars wrote:
The appeal of the 3-4 year lease to me is not having to pay extra for warranty coverage, avoiding major maintenance expenses,
Do some manufacturers not offer warranty for the first 3-4 years if you financed/bought instead of leasing? Most of the ones I've been through or seen either offer it or don't regardless of whether it's a lease or finance. Unless you're saying you just prefer new so you don't have to worry about maintenance expenses.
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