Dave’s Corner Garage Blog- A new vision for Leasing with Winter Tires.
It is both interesting and perplexing why the new car automakers have not become heavily involved in a new car winter tire package on the vehicles designated for sale in Canada. The leasing community which represents the majority of premium and sporty brands of the new vehicles sold in Canada are in need of some innovative and creative solutions regarding winter tires and vehicle leasing.
It is no secret that Canadian weather patterns consists of several winter months that include snowstorms, cold temperatures and snow-packed roads (perhaps parts of southern BC and Vancouver Island could be exempt from this winter statement but let’s agree that Canada is a distinctly winter country). It’s also very evident that the tires installed on the vast majority of new vehicles sold in Canada would be considered “summer” or “sport” tires despite the “all season” moniker that many tires have. In other words, the OEM tires that new cars are delivered with are not very effective in the snow, ice and temperatures below 5 degrees C.
Jim Matthews, President of LeaseBusters stated; “I can’t speak for all new car buyers but I can certainly relay my experience with customers who take over leases. The vast majority of lease transfer ‘Buyers’ want winter tires and actually try to negotiate incentives based on their desire for these tires, especially during the winter months”. Matthews went on to say that “winter tires are not only a fantastic safety feature for vehicles, they’re also a strategically sound lease investment since most original sets of tires will not survive the full term of the lease whereas a set of summer and a set of winter tires should last the full term of most leases”.
Here’s where the automakers and their dealership network can become trendsetters in the leasing community. Automakers can use their extensive buying power to acquire above average grade winter tires, steel wheels or an upgraded alloy wheel that dealers can order as an optional feature for their vehicles. OEM’s can also make these features a dealer installed items that can be ordered through the dealership’s parts department. Factory leasing companies can now authorize winter tire and wheel packages to become part of the new vehicle and thus be eligible to be part of a factory lease package (i.e. part of the MSRP, the residual value and the lease payment).
Winter tire and wheel packages should be part of leases but alas, after researching several OEM dealerships, not one automaker offers this factory option however until that happens, many dealerships offer winter tire packages through their financial services office at the time of sale. This offer allows leasing customers to add a winter tire and wheel package to their lease payment and be protected throughout the term of the lease. As mentioned, this option will allow both sets of tires to survive the term of the lease and the package can be amortized for the full term of the lease using factory subsidized interest rates. This is not a perfect solution but it is much better than customers scrambling to find their tire size in stock in mid-to-late November and paying a premium for winter tires.
Other significant advantages to the OEM solution winter tire package solution indicated by Matthews: “Having winter tires as a factory option converts this option as relevant throughout the spring and summer market (when customers aren’t thinking about the winter) and as importantly, it makes the lease more attractive in the lease-take-over marketplace and lastly, the winter tires can also be insured through the end of lease excess wear and tear protection that can be purchased at the lease’s inception”.
In the end, winter tire and wheel packages should become a mainstream factory option for all new cars sold in Canada. It saves lives, lowers insurance rates and reduces driver anxieties during winter driving; all pretty darn good reasons for the automakers to consider or reconsider this initiative.
For those looking to get the best price on their brand-new vehicle, timing can be a very important factor for a variety of reasons. Going in at the right time of month and/or the right time of year can put you in a great position to maximize your savings. So, when should you look to purchase your new car?
“A great time to start is when manufacturers are looking to clear out the old model year and bring in the new,” says R. James Matthews, President & CEO, Armada Data, parent company of CarCostCanada. “This will vary slightly between manufacturers, however late summer/fall tends to be a great time to maximize savings on a new car purchase. This is due to the fact that manufacturers will increase the incentive offerings on the current model year vehicles to clear them out and make room for the new model year.”
For those who may be wondering, what are manufacturer incentives/rebates? Simply put, an incentive is a discount offered directly by the manufacturer to consumers. These discounts can be passed down for a number of reasons, however common examples include: cash buyers, recent graduates, Costco members, military members etc. When manufactures want to move more units, they will either increase discounts on current programs or create new programs which means more savings for you!
Best time of the month to purchase
We’ve discussed how purchasing at the right time of year can allow you to save more by way of incentives. It turns out that purchasing near the end of the month can often times allow you to garner even greater discounts from the dealer for one simple reason. Dealerships will often be given expected sales targets from the manufacturer and will be financially rewarded for reaching or exceeding these targets. This can help you in your purchase because dealers may be more motivated to sell to meet those monthly sales targets. In summary, purchasing near the end of the month will always put you in a good position to get the best price possible.
Putting it all together
For those looking to fully maximize their savings, what you might want to try is to purchase in the summer or fall, and at the end of the month. What you’ll also want to pay attention to is the availability on the vehicle you’re looking to purchase; you don’t want to wait until there are no vehicles in stock or until it is past the factory order date for the vehicle you are looking to buy. In conclusion, there are three simple things you’ll want to keep in mind when it comes to timing your new car purchase:
Buying in the late summer/fall will allow you to take advantage of the biggest incentive programs
Dealers will be more motivated to sell at the end of the month to hit sales targets
Be aware of the stock supply and factory order deadlines on the car you want to purchase
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Anyone that has ever had a new car has an opinion on whether it is best to own or lease a new car.A recent survey was done on the acquisition habits of Ontario and Alberta new car buyers in terms of the payment method they selected on the procurement of their last new car (which was transacted within the last 18 months). The results weren’t surprising but they might be interesting to the average individual.
According to the survey, 65 percent of people purchased their new car (60 percent opting for dealer financing offers and five percent arranging their own money – whether they had it saved up or used a personal line of credit), 35 percent of people leased their new vehicle.
“These numbers are quite accurate and very similar to other polls that I’ve seen published,” says Jim Matthews, President, LeaseBusters. “So, that begs the question, which method is better? The short answer is – neither!”
Ownership or long-term rental (lease) is a personal / business decision and both methods have their very unique pros and cons; the more appropriate question is why do 65 percent own and 35 percent lease?
After reviewing a healthy list of pros and cons, the real answer is; people who elect to own a car are happy to keep a car for more than eight years. Leasing customers only want to keep their vehicle for four years or less. And this is the answer to whether you should buy or lease your next new car.
If you are happy to keep your new car for more than eight years (and keep in mind, it takes the average Canadian close to six years – 72 months – to pay for the car in full), then you should buy/own that car and be prepared to spend needed money to maintain, repair and pamper that car. In this era, new vehicles are so well-built that this feat is not that difficult and not prohibitively expensive.
If you want to change vehicles every two, three or four years; the only affordable option is for you to lease the vehicle. A four-year lease payment is often the same a 72-month loan payment so the monthly costs are similar to the ownership method; the only difference is after the lease term expires, you simply give the vehicle back to the lessor (the leasing company which is typically the financial arm of the automaker) and lease another new car. Just be prepared, vehicle leasing requires a commitment to a perpetual monthly payment – although experts have quipped that a 72, 84 or 96-month loan payment can be construed as a perpetual payment.
So, there you have it; now you know whether you should buy or lease your next new car. The only thing you have to decide is how long you want to keep your next new car. Changing technology is often the wildcard in these decisions, so be prepared – you may not make the right decision. But that’s ok, there are several means in the marketplace to help if you need to make changes midstream through your plan.
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