The table below summarizes the differences between loans and leases. For more detailed information, visit Understanding Loans and Understanding Leases.
Lease
Loan
Terms
Lease terms are usually between 2 to 4 years.
Loan contracts are usually signed for 4 to 6 years.
Type of vehicle
The shorter term and lower monthly payment of a lease agreement allow you to drive a new and more expensive vehicle every 2 to 4 years.
Higher monthly payments make driving a new or expensive vehicle every 2 to 4 years unpractical.
Ownership
Unless you decide to purchase, you must return the vehicle at the end of the lease.
You own the vehicle.
Up-front costs
Up-front costs include a monthly payment, security deposit, down payment, taxes and registration fees. If you take into consideration the total cost of the vehicle and the monthly payment you want, the sum is usually less than the up-front costs of purchasing.
Up-front costs include down payment, taxes, registration fees, and other charges. This amount is usually larger when compared to lease, especially if you want an expensive vehicle with low to moderate monthly payments.
Monthly payments
Monthly payments are calculated based on the vehicle's depreciation during the lease term, rent charges, taxes, and other fees. Lease payments are usually lower than loan payments.
Monthly loan payments are based on the total amount of purchase price, plus interest charges, taxes and other fees.
Insurance
The insurance premium is usually higher.
The insurance premium is usually lower.
Early termination
You are responsible for early termination charges, as stipulated in the lease contract.
You are responsible for paying off the loan.
Vehicle return
You need to return the vehicle at the end of the lease. There may be some end-of-lease charges.
You keep the car.
Future value
The lessor bears the risk of the vehicle's future market value.
If you decide to sell or trade-in the vehicle at the end of the loan term, the risk is yours.
Maintenance
You are responsible for the maintenance of the vehicle during the lease term.
You are responsible for the maintenance of the vehicle.
Mileage
Most leases impose a vehicle mileage limit. There will be extra charges if actual mileage exceeds the contract limit when you return the vehicle.
No limit.
Excess wear
You might need to pay extra charges when you return the vehicle if the lessor determines that vehicle wear and tear is over the contract limit.
No limit. Like mileage, however, more wear and tear equals lower resale or trade-in value for your vehicle.
End of term
At the end of lease, you can return the vehicle and walk away, lease another vehicle or purchase it for the residual value.
The vehicle is yours.
Wednesday, March 24, 2010
Monday, March 8, 2010
8 tricks up your dealer's sleeve
Auto dealers have lots of tricky ways to make the most out of every sale.
If you're not careful, you can wind up paying more to buy and finance a new car or truck than you really need to.
Look out for these 8 common tricks when you visit the showroom:
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Dealer trick 1. Preying on your lack of information.
There's nothing a dealer loves more than an uninformed consumer who's going to negotiate a purchase based on nothing more than the car or truck's sticker price.
You need to work from the wholesale price the dealer paid and the average transaction price, which are usually thousands of dollars less than the sticker price.
You want to be the smart buyer who pays a little less than the average transaction price -- not the one who pays a little more.
Edmunds.com or Kelley Blue Book are the places to find the critical information you need.
Dealer trick 2. Offering finance charge markups.
During negotiations, your salesperson may say he or she can offer you a lower price if you'll finance the purchase through the dealership.
That's a sign to be very careful. Your salesperson may be hoping to recoup any discount in price through a finance charge markup.
That's when the dealership adds 3 percentage points -- sometimes more -- to the interest rate one of its lenders is willing to charge you.
Here's how it works: You apply for a loan through the car dealership, which sends your information out to four of five finance companies it regularly works with.
The lenders check your credit history and come back with their best offers. One says you're eligible for a loan with a 7% annual interest rate. Only the car dealer tells you the rate is 10%.
On a $22,000, five-year loan, that extra 3% adds $1,908 to your payments. The lender collects the money and sends anywhere from half to all of it back to the dealer.
Dealer trick 3. Making the deal all about the monthly payment.
Salespeople often ask potential buyers what kind of monthly payment they can afford.
Don't tell them, because they'll use that number to sell you a more expensive car or truck than you may have wanted and maximize the dealership's profits on your sale.
The salesperson will figure out the most you can possibly spend by dragging the payments out for as long as possible and still hit that payment.
He or she will then show you cars and trucks in that price range, which is often higher than what you wanted to spend, while reassuring you that this fine vehicle is within your budget.
Let's say you came in to buy a compact sedan that cost about $20,000 but let slip that you could afford a payment of $450 a month.
The salesperson immediately recognizes that a 60- or 72-month loan would allow you to buy a $25,000 midsize sedan and your payment would still be about $450 a month -- and that is what he or she will try to sell you.
The bigger sticker price, and longer loan, both mean more money for the dealership.
Dealer trick 4. Distracting you with giveaways.
Buy a car, get a free vacation! Or television! Or some other giveaway that's totally unrelated to the vehicle you're buying.
They're intended to make you feel like you're getting more than just a new car or truck and distract you from negotiating the best deal.
Dealer trick 5. Saying the deal is only good today.
Salespeople often tell buyers an offer is "only good today" to keep you from checking out the deals at another showroom or having second thoughts about the vehicle you're considering.
In either case, you're almost always likely to get the same deal the next day.
Dealer trick 6. Using the old bait-and-switch.
You see an ad that offers a great price on the model you've been considering.
But when you arrive at the showroom, you find that it's only good for a basic, no-frills version. And there's only one of those on the lot.
The salesperson quickly steers you toward one of the many better-equipped -- and more costly -- models.
Dealer trick 7. Letting you drive away before finalizing the loan.
"Spot delivery" or "yo-yo financing" is when you take delivery of a vehicle before finalizing the financing required to pay for it.
The salesperson promises to get you a loan, even if you have bad credit, for what sounds like a reasonable rate.
You sign some paperwork to get the financing approved, but when you return to close the deal, you find that you're being charged several percentage points higher than you were promised.
Dealer trick 8. Dangling dealer add-ons.
Dealers try to boost their profits on hot-selling models by charging thousands of dollars for extra accessories that cost them hundreds of dollars to provide.
The add-ons can be anything from mud flaps and pinstripes to leather seats installed in a base model that never comes from the factory with such an upscale interior.
Those extras -- and the new higher asking price -- are listed on a second window sticker right next to the factory sticker.
Although dealer add-ons are never worth the cost, they're a good indication that the salesperson will expect you to pay the full inflated price or something very close to it.
If you're not careful, you can wind up paying more to buy and finance a new car or truck than you really need to.
Look out for these 8 common tricks when you visit the showroom:
- Advertisement -
{"width":"300","height":"250","ccid":"41232","campid":"19059","cpm":"2.40"}
FREE
INSURANCE
QUOTES
Dealer trick 1. Preying on your lack of information.
There's nothing a dealer loves more than an uninformed consumer who's going to negotiate a purchase based on nothing more than the car or truck's sticker price.
You need to work from the wholesale price the dealer paid and the average transaction price, which are usually thousands of dollars less than the sticker price.
You want to be the smart buyer who pays a little less than the average transaction price -- not the one who pays a little more.
Edmunds.com or Kelley Blue Book are the places to find the critical information you need.
Dealer trick 2. Offering finance charge markups.
During negotiations, your salesperson may say he or she can offer you a lower price if you'll finance the purchase through the dealership.
That's a sign to be very careful. Your salesperson may be hoping to recoup any discount in price through a finance charge markup.
That's when the dealership adds 3 percentage points -- sometimes more -- to the interest rate one of its lenders is willing to charge you.
Here's how it works: You apply for a loan through the car dealership, which sends your information out to four of five finance companies it regularly works with.
The lenders check your credit history and come back with their best offers. One says you're eligible for a loan with a 7% annual interest rate. Only the car dealer tells you the rate is 10%.
On a $22,000, five-year loan, that extra 3% adds $1,908 to your payments. The lender collects the money and sends anywhere from half to all of it back to the dealer.
Dealer trick 3. Making the deal all about the monthly payment.
Salespeople often ask potential buyers what kind of monthly payment they can afford.
Don't tell them, because they'll use that number to sell you a more expensive car or truck than you may have wanted and maximize the dealership's profits on your sale.
The salesperson will figure out the most you can possibly spend by dragging the payments out for as long as possible and still hit that payment.
He or she will then show you cars and trucks in that price range, which is often higher than what you wanted to spend, while reassuring you that this fine vehicle is within your budget.
Let's say you came in to buy a compact sedan that cost about $20,000 but let slip that you could afford a payment of $450 a month.
The salesperson immediately recognizes that a 60- or 72-month loan would allow you to buy a $25,000 midsize sedan and your payment would still be about $450 a month -- and that is what he or she will try to sell you.
The bigger sticker price, and longer loan, both mean more money for the dealership.
Dealer trick 4. Distracting you with giveaways.
Buy a car, get a free vacation! Or television! Or some other giveaway that's totally unrelated to the vehicle you're buying.
They're intended to make you feel like you're getting more than just a new car or truck and distract you from negotiating the best deal.
Dealer trick 5. Saying the deal is only good today.
Salespeople often tell buyers an offer is "only good today" to keep you from checking out the deals at another showroom or having second thoughts about the vehicle you're considering.
In either case, you're almost always likely to get the same deal the next day.
Dealer trick 6. Using the old bait-and-switch.
You see an ad that offers a great price on the model you've been considering.
But when you arrive at the showroom, you find that it's only good for a basic, no-frills version. And there's only one of those on the lot.
The salesperson quickly steers you toward one of the many better-equipped -- and more costly -- models.
Dealer trick 7. Letting you drive away before finalizing the loan.
"Spot delivery" or "yo-yo financing" is when you take delivery of a vehicle before finalizing the financing required to pay for it.
The salesperson promises to get you a loan, even if you have bad credit, for what sounds like a reasonable rate.
You sign some paperwork to get the financing approved, but when you return to close the deal, you find that you're being charged several percentage points higher than you were promised.
Dealer trick 8. Dangling dealer add-ons.
Dealers try to boost their profits on hot-selling models by charging thousands of dollars for extra accessories that cost them hundreds of dollars to provide.
The add-ons can be anything from mud flaps and pinstripes to leather seats installed in a base model that never comes from the factory with such an upscale interior.
Those extras -- and the new higher asking price -- are listed on a second window sticker right next to the factory sticker.
Although dealer add-ons are never worth the cost, they're a good indication that the salesperson will expect you to pay the full inflated price or something very close to it.
2010 Mercedes-Benz B200
2010 Mercedes-Benz B200
When I picture a Mercedes-Benz in my head, the original SLR gullwing, iconic G-wagon and classic SEL saloons usually dominate the space between.
Now, the B200 Turbo is no SLS AMG; and, for the price of a SLR McLaren, you could have at least a dozen fully-loaded versions in which to scoot around your compound.
To be completely honest though, I’ve never given the B-class much credence, let alone a second glance in its five year run in Canada. That said, the littlest Benz surprises and impresses at every turn during my week-long test.
My B200 tester has a two-litre turbocharged “four” making a respectable 197 hp and 206 lb.-ft. of torque. The non-turbo version makes 134 hp and 136 lb.-ft. with a manual transmission standard on both models.
Mine has the optional Autotronic CVT instead. Gear changes are smooth, quiet and solid with no rubberband effect. There are no sporty paddles; however, a button near the shift knob lets you put the vehicle into comfort or sport driving modes.
The latter retards the electronic stability program and remaps the ECU for quicker response, and you can tap the shifter left or right to change gears manually.
Seventeen-inch wheels and winter rubber provides good grip. It can and will torque steer off-line if you’re too hard on the throttle. Despite its small stature and short 2,778 mm wheelbase, the B200T is stable and predictable most of the time thanks to its front wheel drive layout.
At 1,395 kg plus driver, it doesn’t feel underpowered. It passes with confidence on the highway and can go from zip-to-100 in 7.6 seconds with some noticeable turbo lag in first gear.
The B-class is, in fact, the only Benz available with front-wheel drive in Canada. It’s also the smallest Mercedes sold here. Perhaps the biggest surprise is that this might very well be the most functional vehicle currently being offered by the automaker.
It has four doors, a lift-up tailgate and cargo area that increases capacity from 544 litres to a quite generous 1,530 litres. The rear seat cushions flip forward and 60/40-split seatbacks fold down to yield a totally flat floor (the rear section is height-adjustable) complete with metal tie downs, storage bins on both sides and a sliding cargo cover.
Solid chromed metal trim, high quality plastics, plush carpet and impeccably-finished gaps speak to the quality and workmanship of the interior. Adjustable thin-profile rear headrests offer an unobstructed view through the rear glass, provided there are no passengers back there. Speaking of which, leggy ones ought to be fine while headier people over six-feet could get a bit claustrophobic.
In the front, a comfortable driving position is easy to achieve thanks to the tilt-telescoping multifunction leather steering wheel. The speed-sensitive power steering is direct with good feedback. It tracks dead straight, though a smaller diameter wheel could improve response.
The passenger cabin remains cozy and quiet with just enough storage space and drink holders for most people needs. And, with an adjustable elbow rest between them, the standard front seats are good, supportive and well-bolstered enough for me, so I don’t feel a need to upgrade to 10-way power adjustable ones. Full leather is also optional.
It comes with heated seats. The dash area features soft-touch surfaces and, though it’s not the most luxurious Mercedes interior, it gets the job done with a MP3-compatible AM/FM/6CD six-disc in-dash stereo with Bluetooth hands-free phone hookup.
The B200T comes with six standard airbags and the highest five-star crash rating in the European NCAP (New Car Assessment Programme).
Though it may look like a miniature R-class crossover, the B-class doesn’t pretend to be anything more than what it is.
Besides being an easy-to-drive and good-looking compact crossover, the B200T is a functional, economical urban commuter that’s quick and nimble when you need it to be.
When I picture a Mercedes-Benz in my head, the original SLR gullwing, iconic G-wagon and classic SEL saloons usually dominate the space between.
Now, the B200 Turbo is no SLS AMG; and, for the price of a SLR McLaren, you could have at least a dozen fully-loaded versions in which to scoot around your compound.
To be completely honest though, I’ve never given the B-class much credence, let alone a second glance in its five year run in Canada. That said, the littlest Benz surprises and impresses at every turn during my week-long test.
My B200 tester has a two-litre turbocharged “four” making a respectable 197 hp and 206 lb.-ft. of torque. The non-turbo version makes 134 hp and 136 lb.-ft. with a manual transmission standard on both models.
Mine has the optional Autotronic CVT instead. Gear changes are smooth, quiet and solid with no rubberband effect. There are no sporty paddles; however, a button near the shift knob lets you put the vehicle into comfort or sport driving modes.
The latter retards the electronic stability program and remaps the ECU for quicker response, and you can tap the shifter left or right to change gears manually.
Seventeen-inch wheels and winter rubber provides good grip. It can and will torque steer off-line if you’re too hard on the throttle. Despite its small stature and short 2,778 mm wheelbase, the B200T is stable and predictable most of the time thanks to its front wheel drive layout.
At 1,395 kg plus driver, it doesn’t feel underpowered. It passes with confidence on the highway and can go from zip-to-100 in 7.6 seconds with some noticeable turbo lag in first gear.
The B-class is, in fact, the only Benz available with front-wheel drive in Canada. It’s also the smallest Mercedes sold here. Perhaps the biggest surprise is that this might very well be the most functional vehicle currently being offered by the automaker.
It has four doors, a lift-up tailgate and cargo area that increases capacity from 544 litres to a quite generous 1,530 litres. The rear seat cushions flip forward and 60/40-split seatbacks fold down to yield a totally flat floor (the rear section is height-adjustable) complete with metal tie downs, storage bins on both sides and a sliding cargo cover.
Solid chromed metal trim, high quality plastics, plush carpet and impeccably-finished gaps speak to the quality and workmanship of the interior. Adjustable thin-profile rear headrests offer an unobstructed view through the rear glass, provided there are no passengers back there. Speaking of which, leggy ones ought to be fine while headier people over six-feet could get a bit claustrophobic.
In the front, a comfortable driving position is easy to achieve thanks to the tilt-telescoping multifunction leather steering wheel. The speed-sensitive power steering is direct with good feedback. It tracks dead straight, though a smaller diameter wheel could improve response.
The passenger cabin remains cozy and quiet with just enough storage space and drink holders for most people needs. And, with an adjustable elbow rest between them, the standard front seats are good, supportive and well-bolstered enough for me, so I don’t feel a need to upgrade to 10-way power adjustable ones. Full leather is also optional.
It comes with heated seats. The dash area features soft-touch surfaces and, though it’s not the most luxurious Mercedes interior, it gets the job done with a MP3-compatible AM/FM/6CD six-disc in-dash stereo with Bluetooth hands-free phone hookup.
The B200T comes with six standard airbags and the highest five-star crash rating in the European NCAP (New Car Assessment Programme).
Though it may look like a miniature R-class crossover, the B-class doesn’t pretend to be anything more than what it is.
Besides being an easy-to-drive and good-looking compact crossover, the B200T is a functional, economical urban commuter that’s quick and nimble when you need it to be.
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