In this edition of the newsletter, a car sales veteran of 33 years offers a defence of leasing a car instead of buying. I looked at this debate in a recent newsletter and came down on the buy side. That prompted a response from car sales veteran Jeff Stewart in which he offered some points in favour of leasing. Here’s an edited version of what he wrote:
Hello Mr. Carrick, I’ve been in automobile sales 33 years. I would like to challenge you on your article on leasing.
Leasing when driving a high number of kilometres is actually better and costs less. In leasing you’ve offered to buy the extra kilometres up front for approximately 10 cents per km after the normal 24,000 kilometres allowed. If you bought that car for cash or financed it under the same situation you’re paying approximately 60 cents a kilometre in depreciation. So if you drive 40,000 kilometres per year, you’ve personally suffered that depreciation because you own it.
Another factor to consider is interest lost on your money by paying cash and 100 per cent of the HST up front. Car accidents are also a factor. When owning, you suffer the depreciation of the car. This is huge because nobody wants to buy a vehicle that was in an accident. If leasing, you simply drop off the keys at lease end and the leasing company suffers that depreciation and the vehicle gets sold at auction.
Finally, when dropping off a leased vehicle after the term is up, you are not charged for any mechanical problems the car may have. The leasing company simply eyeballs the vehicle and charges for dents, scratches, tire wear, burn holes, windshields etc. You could turn that vehicle in with the air conditioner not working, and the ABS light on and not be charged.
You want to OWN things that appreciate and RENT or LEASE things that depreciate. A vehicle is one of the worst depreciating items on the planet. A home would be an example of something you’d want to own because over time it almost always appreciates. A vehicle, NO.
The bolder an adviser’s predictions, the more cautious prospective investors should be
‘What can I do to better prepare for an awesome retirement experience?’
Expect a pity party for the middle class and their debt in the coming federal election
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Rob’s personal finance reading list…
The $20 solution to a filthy kitchen problem
Bamboo cutting boards are more sanitary than plastic, and they’re cheap. I found a bunch on Amazon.ca for $20 or so.
Credit cards, a user’s guide
Good information for new and veteran card holders, notably an explanation on the link between missing card payments and hurting your credit score.
A mortgage stress test cheat sheet
RateSpy.com on recent changes to the stress test that is applied to see whether people getting mortgages can afford their payments if interest rates jump. The stress test is now a bit easier than it was previously – will this juice house prices in the second half of 2019?
What if my kid takes a gap year?
A gap year means taking a year between graduation from high school and university or college. Find out here what taking a gap year can mean for scholarships.
Today’s financial tool
The CDIC Trivia Challenge will test your knowledge of how Canada Deposit Insurance Corp. works to protect money in bank accounts and term deposits at member banks.
Video of the week
The seven deadly sins of investing, as interpreted by Josh Brown of the Reformed Broker blog and guest experts. Lust, gluttony, envy and more.
Q: I'm starting to hear that the cost of houses, condos, townhouses are going down in two years – why do people think this way?
A: I wonder if the people talking about a housing decline in two years are thinking about the potential impact of higher interest rates. Right now, there’s a growing sense that rates will remain steady or even decline a bit. This rate outlook might actually help house prices in the near term.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
In case you missed these Globe and Mail personal finance-related stories
- With taxes, you’re guilty until proven innocent
- Can Paul move to a larger condo, retire early, and still be able to set sail in a new boat?
- Protect your retirement portfolio from ‘drawdown’ erosion
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