When to buy out a lease

When to buy out a lease

Leasing-to-buy usually ends up being more expensive than a loan.

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Q: “I recently leased a Honda Fit and plan to buy it at the end of the five-year term. Is this a good strategy?”

—Linda van Vulpen, Halifax

A: Leasing-to-buy usually ends up being more expensive than a loan. Here’s why: interest charges are higher on a lease because you pay it off more slowly. The buyout at the end of the lease accrues interest with no decline over the entire term. Leasing contracts may also include up-front and buyout fees worth hundreds of dollars. Finally, many people who lease often don’t have money available for the buyout, so they end up financing through the dealer at market interest rates.

George Iny is the president of the Automobile Protection Association. Send him your automotive questions at ask@moneysense.ca

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