Dave’s Corner Garage: What Do I Do For My Next Car?

New Car

Guest post by Vince Beretta

Having been in the auto retail industry for nearly my entire life, I often get asked for advice on “What I should do for my next car?”

I was recently called upon by my friends Kathleen and Neal (K&N) and I thought their story might make for a good story.

K & N use their car for going to and from work, dropping off kids, appointments, Home Depot, grocery shopping, getaways, etc.. K’s parents have a family cottage that they frequently visit in the summer and fall.

Neal has a work truck and a 2015 FWD Ford Escape that that they leased for 36 months with a 60,000 KM allowance.

The Escape is coming to the end of the lease in October, and K asked what should they do next? In order to give them a fulsome answer I needed some information.

Q. What is your budget? And do you want to finance new, lease or buy with cash?
A. We want to buy used and pay $10,000 to $14,000, and we want to pay cash.

Q. What kind of vehicle do you want?
A. A small SUV or station wagon.

Q. How did you like the Escape?
A. It’s great, suits our needs.

Q. How many KMS are on the odometer? And what is your over KM penalty?
A. Currently we have 69,000 (9,000 over) and the penalty is twelve cents.

Q. How many more KM do you expect you’ll have in October?
A. We estimate 75,500

Q. What are the condition of the tires? Do you own snow tires for the Escape?
A. We just got two new ones, and we own a set of snows on steel rims.

Q. Do you have any damage that you would have to repair if you returned it and what might it cost?
A. Yes – and we had it estimated at about $800 to have repaired

Q. Would you repair it if you kept the car?
A. No

Q. How much can you buy the Escape under the terms of their lease?
A. $12,000

K thought that I was going to recommend that they simply buy-out their Escape and she was right. But first we needed to know its “market value”. I asked K to check various online sources to find Ford Escapes close to theirs.

I quickly calculated what it would cost them to return their car at lease-end. They would have to pay $1,860 in over kilometer fees (15,500 x .12) and another $800 in estimated body repairs for a total of $2,660. Additionally they would lose their investment in their snow tires, unless they bought another Ford with the same bolt pattern and wheel size.

And as it turns out, their buyout price of the lease was well below the market of $15,000.

So, with this information it’s an easy decision for K&N to buy-out their lease, and drive this car for another six years. They’ll pay down their mortgage and contribute to their RRSPs instead of making car payments. By buying out this car they will actually save nearly $3,000 considering the penalties and the lost investment in their snow tires!

What do I do for my next car? Simple question, but not always a simple answer unless you know all the right questions to ask.

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