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Bad credit car leasing allows for affordable payments over a shorter term...allowing you to re-establish your credit sooner.

WHY YOU SHOULD CONSIDER LEASING

Leasing enables you to achieve an affordable payment over a shorter term because you don’t pay for the future value of the vehicle (also called the residual value). Instead, you can choose to purchase it, if you want, for a preset amount after you’ve essentially had an extended test drive.

As a result, you can usually drive a newer vehicle for the same payment as an older vehicle over the same term. A lease also enables you to achieve a shorter payment term on the same vehicle with a similar payment to a longer term loan to help you avoid the dangers to long term loans.

TYPES OF LEASES

There are two main types of leases:

1. Open End Lease
2. Closed End Lease

In either type of lease, if the vehicle is worth more to you than the Residual Value, you should have the ability to purchase it and continue driving the vehicle or selling it to capture the profit. Ezee Credit will also give you credit for any excess value at the lease end on a tax free basis towards your next vehicle. If you purchase the vehicle in accordance with the lease, you should also satisfy any obligations you have under the lease regardless of lease type.

OPEN END LEASE

In an open end lease, your responsibility is generally limited to ensuring the lessor obtains the residual value of the vehicle at the end of the lease regardless of the kilometres or wear and tear. Obviously, the better the condition of the vehicle, the more likely the lessor will obtain the required amount. In addition, your responsibility is limited to 20 per cent of the value of the residual value under the Consumer Protection Act (Ontario) provided there are no excess kilometres or wear and tear. This way, you are protected if the lessor estimated wrong or put too high a residual value on the car when trying to lower your payment.

CLOSED END LEASE

In  a closed end lease, the lessor establishes the residual value and you are responsible for any excess kilometres and excess wear and tear. The lease will specify the cost per excess kilometre that you will have to pay for if you drive over your kilometre allowance. For example, at .12 cents/kilometre, if  you drive an extra 10,000 kilometres, you would be responsible to pay $1,200.00 plus taxes. Sometimes determining what exactly is "excess wear and tear" is unclear and you should look at the definition in the lease. You will also be responsible to pay for the cost of any excess wear and tear at the end of the lease and the applicable taxes.

CUSTOM DESIGNED AROUND YOU

When the residual value is determined properly, there is often little difference between a closed end and open end lease. The residual value of a vehicle is based upon a number of factors, including the model year and type of vehicle, the term of the lease and the estimated kilometres on the vehicle when the lease will be completed.

It is critical to analyse your specific driving needs and habits to come up with a realistic residual value. This lets you pay only for the driving you anticipate doing. In addition, there is no point in under-estimating your driving just to get to a lower lease payment, and then having the responsibility to pay for it later. This is a little like kidding yourself. The same happens when people take out a long term loan and plan to do a lot of driving but feel that the driving won't cost as much because you "purchased" the vehicle.

In reality, a vehicle will depreciate based on the driving actually taking place, whether a lease or loan, and your outstanding financial payout (what you owe) compared to the vehicle's value will adjust based on this. We have found that most people are far more successful paying for their driving as they go rather than at the end of a lease, or a loan, when they have not saved sufficient funds or find that the vehicle has died before the lease or loan is paid off. A lease is a very flexible financing method that let's us take the time to factor in your particular needs and custom design a lease that's right for you.

OTHER LEASING DIFFERENCES

When you purchase a car, you pay the PST and GST on the vehicle at the time of purchase. With a lease, you only pay the taxes on the portion of the vehicle you consume (i.e. the difference between the selling price and the residual value). As such, you pay the PST and GST on the lease payment. You never pay the taxes on the residual value unless you purchase the car. Also, as you know, GST has recently been reduced. If the GST or PST rates were to drop again, you receive the benefit of the lower tax rates when they become effective on your remaining lease payments. With a purchase, your taxes are calculated on the whole value of the vehicle and fixed at the time of purchase.

With a lease or a loan, you can make a down payment to reduce your payment, term (or residual value if a lease) if you want to but the down payment is consumed when the lease or loan is done. With leasing, more often, a refundable security deposit is used which is still available to you at the end of the lease towards buying out the leased vehicle, being returned to you or used toward getting your next vehicle.

With a lease, the lessor retains title to the vehicle. With a loan, even though the "title" is in your name, the finance source essentially has full rights to the vehicle until it is paid off so there is no real difference to you. Leasing can also offer a simplified approach for writing off the payments for tax purposes, when the vehicle is used for business, than having to maintain separate interest and capital cost tables when a loan is used.

LEASING JUST MAKES SENSE

At Ezee Credit, the goal is to have the shortest possible term with a realistic buyout so you can increase your odds of satisfying the lease successfully. At that time, or often before the lease is even up, we can usually identify a newer or brand new vehicle at improved financing costs (subject to your other credit factors).

Getting into a new vehicle sooner with a shorter term lease can lead to better financing rates with your improved credit. You will also benefit from fewer out-of-pocket repair costs and be able to drive a newer more reliable vehicle. Plus you receive the financial benefits of starting to re-establish your credit sooner as you satisfy, and actually complete, your shorter term lease.