These days, everyone is feeling the pinch at the pump and if you drive an old truck like I do it’s especially tough on the wallet.
That’s why I’m in the market for a new car.
Experts agree that buying a new car is the second-most expensive purchase that most people will make in their life.
So whether or not the price is right, and much like gas, new vehicles aren’t cheap.
A recent price index survey from AutoTrader.ca found that the average price of a new vehicle in Canada is $61,821.
That’s a record high, up from $39,104 in June of 2019; an increase of 58 per cent.
So what is exactly driving these double-digit price increases?
“I would say that it’s two-fold,” said Rick Wright of Valley Mitsubishi. “One. From a manufacturer’s standpoint, they have to increase their prices just based on the cost of metal. The cost of labour, and everything else has increased
“The other factor is we went through quite a few years where vehicles were heavily discounted because there was a lot of supply. To move the cars, they had to discount them.
“So now we’re in a situation where there are more buyers than there are vehicles and the manufacturers don’t have to discount them. And there is actually a waiting list for most vehicles right now.”
Basic economics: The law of supply and demand times inflation equals no deals on wheels.
And that brings up an important question as to whether you should lease or buy a vehicle.
“It’s a lifestyle decision,” said Curt Reimer of Valley First, a division of First West Credit Union.
“If you prefer having some security, having something you will own at the end of that term, you can finance it, pay it off and own a vehicle.”
Reimer added, though, if “you prefer to have a newer vehicle every so often, a nicer vehicle, a more reliable vehicle, you might want to lease.”
There are pros and cons to both.
When it comes to leasing, Reimer says it can be great because there’s less structure.
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“At the end of that period of time,” said Reimer, “you can either give the vehicle back and take out a new lease four years from now or you could buy out your lease.”
Reimer adds that if you decide to buy out your lease, you might need to finance that lump-sum payment at whatever the rates are four years from now.
Still, leasing does have certain tax benefits that can be realized. And, typically, the monthly payments are less than when financing a new vehicle – which will depreciate the moment you drive it off the parking lot.
“If you have the cash and you need to finance, it’s something that you are now entering into an agreement for a period of time to at the end own this vehicle,” said Reimer.
“You know upfront what the cost is going to be. You can see through a calculator, or the financier can share with you the total cost of borrowing over your term.”
Reimer added “that security alone, at the end of the day, you might have paid a little bit more out of pocket. It’s essentially locking into something you know the outcome of, and for some people getting rid of that risk is a huge benefit.”
The decision to lease or buy can be as personal as what kind of vehicle you decide to drive.
I’ve decided to buy a plug-in hybrid so I can drive by the gas station and not feel the pinch at the pump.
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