Three years ago, faced with two young kids at home and the need to replace her stolen minivan, Jennifer White took the path of least resistance and now regrets it — she signed up to lease an identical minivan for another four years.
"It was a very rash decision," says White, adding that she's "sick of the vehicle and I'm stuck with it. It's the exact same thing I had before, so I've essentially been driving the same vehicle for, I don't know, six years.
"And we're at a stage in life where we do not need a minivan any more. So I'm literally just counting the minutes until I can get rid of this thing."
On top of that, White's aging minivan is starting to cost her money in expensive maintenance items such as new tires.
Plus, since moving from downtown Windsor to the suburbs, she's been racking up the kilometres. By exceeding the kilometre limit on her leasing agreement, she is spending extra cash to the tune of 12 cents a kilometre. And when she returns the van, if the leasing company deems there has been damage or excess wear and tear, she'll be on the hook for more charges there, too.
"So I've been anticipating writing a cheque for over $3,000 just for the virtue of saying good-bye to my vehicle. I'm aware of it; we're planning for it. But it's kind of, like, for the cost of my lease payment plus what I am putting aside every month for those kilometres, I could be driving something a lot nicer."
White's experience stands as a cautionary tale for anyone planning to lease a new vehicle. It's a story worth hearing for one of every two new-vehicle buyers in Canada right now.
According to the Power Information Network, a division of market research firm J.D. Power and Associates, today 50 per cent of all new vehicle transactions in Canada are leases, up from about 40 per cent at the same time last year.
DesRosiers Automotive Consultants has found a similar trend. In 2005, 45 per cent of all new-vehicle transactions were leases, up from 39.5 per cent in 2004.
Both researchers say leasing is making a dramatic comeback. Back in 2001, just 27 per cent of buyers leased their new vehicle — and 59 per cent financed their vehicle with a loan. Since then, the number of people leasing has been rising steadily and now it is in the realm of the all-time high for leasing: 1997, when DesRosiers says 46.8 per cent of all new-vehicle transactions were on a lease. The steady uptick in interest rates largely explains the recent leasing boom.
"With leasing, the monthly payment is way lower," says J.D. Power's Rohan Lobo. "And that's why there is more of a focus on retail leasing."
According to J.D. Power's recent Dealer Satisfaction Study, 40 per cent of car dealers in Canada say retail leasing has become their most important finance area of business, up from 32 per cent last year. So dealers are putting much more effort into the leasing side of the business because Canadians are saying they are zoned in on keeping their monthly payment as small as possible.
"Retail leasing is pretty much top of mind for dealers today," says Logo, who manages Power's syndicated research. He adds that "rising interest rates have pushed the cost of vehicle ownership up, and dealers have turned to leasing as a more affordable way to get consumers into new vehicles."
Auto consultant Dennis DesRosiers agrees that rising interest rates are a factor in the increase in leasing, but he also believes that the heavy taxes and fees consumers face in Canada are pushing more and more consumers into a lease.
