Recently leased a 2021 Civic.
For background:
- I’m a newcomer, arrived March 2021. 0 credit history. But I have work.
- I drove a used 2008 Vios (Toyota) back in my home country. Bought that Vios in 2014, so I know how to buy and scope out a used car. I roughly have an idea of what maintenance items I have to watch out for.
- Before leasing the Civic, I was renting a car for $800/mo. Enterprise up’d their rates last month to $1K so I was in a hurry to get a car.
- Live in Stittsville. Not exactly a commute-friendly city so a car is needed for most errands.
I want a Civic/Corolla, because that’s what I’m used to. Here’s what I found out looking for used Civics/Corollas in Ottawa:
- Looked through 4-5 dealerships looking for a used car.
- 2017/2018 Certified Pre-owned reaches into 18K-20K (tax included).
- I’m already at Full G. Car insurance and Interest rates are absurdly high for a newcomer, regardless if it’s new or not. Interest rates at 4.99%-6.99%. Insurance at $270-$390 per month. Looked through Sonnet, TDInsurance, Scotia, Economical, and BelAir. TD gave me the lowest.
Brand New Car:
- Warranty for 3 years. 0.99% interest rate.
- Used car payments are almost the same due to the interest rates I get being a newcomer.
- Looked into getting a new car instead.
Went for a new car instead:
- I know how much it costs to maintain a used car in my country, but I don’t know how much it costs here.
- I can have coolant tanks and fans replaced for CAD$300 back in my home country, but I don’t know if the income-expense ratio for car repairs are the same here.
- I also have little idea on winters.
- I’m dealing with so much right now just settling, paying rent/utilities, and moving, might as well save myself the maintenance headache and go for the new car if the difference in monthly payments is small due to 2 things as a newcomer: high interest rates and high insurance payments.
So onto thinking about Financing vs. Leasing:
Finance 0.99%
DP: CAD$5000
Payments: CAD$385.5 x 60mos = 23,130
Total Out: CAD$28,130
Lease 0.99%
DP: CAD$2500
Payments: CAD$285 x 48mos = 13,680
Buy out after 4 years: $10,330.
Total w/ Buy out: CAD$26,510
Here’s why I went for Leasing (I got approved for 4 years):
- If I finance, I’m gonna DP a large amount of capital and monthly payments to a car during a time where my settlement isn’t final yet. It doesn’t sound right. I’m not fully settled yet and don’t have enough breathing room to have $5,000 and $100 more per month stuck at a utility. I don’t know the unexpected expenses and premiums as an immigrant.
- “Lease and Buy out” vs. “Finance Total Out” roughly costs the same due to these low interest rates. I have more $100 cashflow per month if I lease.
- For context. A 2017 lease return sells for $17K at current market rates in Ottawa. My buy out is $10,330 by 2025, I’m pretty sure by then I can sell my 2021 Civic for around $12K-$15K (depending on the popularity of ICE vehicles at a rapidly electrifying automobile industry).
This might be different for other cars (Corolla, Elantra, etc.). As far as all my calculations go, leasing the heavily discounted 2021 Civic from a newcomer’s perspective is a better financial decision than financing it.