Royal Bank of Canada

For many years Royal Bank has offered a balloon loan with very attractive options. They call it Royal Buy-Back®. This vehicle loan will give you similar payments to a lease, but has many important advantages over leases. First, you get to negotiate the best price for the vehicle. Second, the interest rate is disclosed in writing. Third, there are no restrictions whatsoever on prepayment or early terminations. Fourth, you own the car from the outset. These features will save you a lot of money and second guessing.

Royal Buy-Back offers many choices at the end of the term:

1. You can pay off or refinance the loan balance at the end of the term.
2. You can trade in the vehicle or sell it personally. Both of these options can save you money. If you trade in the vehicle, you won't have to pay sales tax on the trade-in value. If you sell the vehicle for more than the remaining loan balance, you keep the difference.
3. You can return the vehicle and walk away. No penalty, no problem. But remember that the car must be in good shape and have no more than the agreed upon kilometers. If there is some damage or excess kilometers, there will be a charge upon return of the vehicle.

For more information about the Royal Bank's vehicle loan programs click on this link to visit their web site:
http://www.royalbank.com/carloan/royalbuyback.html

National Bank

National Bank recently launched the Auto-Option balloon loan across Canada. The program is similar to the Royal Bank's Buy-Back loan. You can finance the purchase of a new or used car from a dealer, an independent garage or even from an individual.

Auto-Option loan also offers many choices at the end of the term:

1. Transfer the vehicle to the Bank, thereby repaying your loan in full.
2. Sell the vehicle yourself, reimburse the Bank and pocket the difference.
3. Keep the vehicle and finance or repay the balance.

For more information about the National Bank's vehicle loan programs click on this link to visit their web site:
http://www.nbc.ca/cgi-bin/nbc.exe?SCT=3B-1G

General Motors Acceptance Corporation

General Motors Acceptance Corporation (GMAC) is the best of the big three. They offer a lease: SmartLease, a one payment lease: SmartLeasePlus, traditional financing, and a balloon loan: SmartPurchase. They have been more proactive in offering lease disclosure than any other major manufacturer. This had a tremendous impact on the industry because GM is such a large player in the industry. Other companies fought disclosure kicking and screaming all the way, but if your biggest competitor is giving consumers a level playing field, you've got no choice but to follow the leader. I recommend GM's financing programs for two main reasons.

First, unlike most major manufacturers, GMs finance arm, GMAC, will deal with their customers directly. This means you can get the straight goods without the dealer padding the deal. There have already been lawsuits in the U.S. against manufacturers who allowed dealers to pad deals. It works like this: you need to end your lease early for whatever reason (vehicle written-off, stolen, early buyout, early trade-in, etc.). The manufacturer's finance arm tells you to talk to your dealer to find out how much you still owe on the lease. So you call your dealer, he calls the finance company to find out how much you owe, and then adds $1,500. He calls you and tells you the amount you still owe including his $1,500 ransom for making a couple calls and doing some paperwork. It's simply criminal. GMAC has avoided this whole mess by speaking to their customers directly.

Second, they do not charge any penalty if you pay off your lease early. Unlike other finance companies, who charge unearned interest when leases are terminated early, or flat rate penalties for early lease terminations, GMAC simply calculates how much you still owe, much like a bank would do on a loan. This is the honest and fair thing to do. Just because you lease instead of taking out a loan you shouldn't be raked over the coals if you want to terminate your lease early.

For more information about GMAC click on this link to visit their website site:
GMAC of Canada

Honda Canada Finance Inc.

Among foreign based manufacturers Honda Canada Finance Inc. (HCFI) has proved to have fair contracts, good disclosure, and excellent customer relations.

For more information about HCFI click on this link to visit their website site:
HCFI

Conclusion

Your first step should be to consider a traditional loan. With a loan your payments are higher, but you will eventually have a vehicle that is bought and paid for and you can enjoy driving it without any payments at all. When it's time for something new, you can trade in that vehicle and get some equity back from it.

If you want to drive a more expensive vehicle for the same money, would like lower monthly payments, or would like to buy a new car more often, then your next step should be to consider a balloon loan. A balloon loan is similar to a traditional lease, but is less expensive and more flexible if you plan to keep your vehicle for longer than 4 years. It gives you the advantages of leasing combined with the advantages of buying, and all the consumer protection that lenders must legally provide to borrowers. It offers the best of both worlds.

Finally, if you plan to keep a vehicle for a short period, say no more than 4 years and don't plan on purchasing the vehicle at the end of the lease, check out some of the manufacturer's leases. Remember that some companies like GMAC and Honda Canada Finance Inc. (HCFI) do a better job, but others are very difficult to deal with when you want to pay out your lease early, trade-in early, or terminate the lease prematurely. Also be careful with dealers who switch leases without your knowledge or consent. You may go to a GM dealer because you saw a GMAC lease and sign a lease contract that is not from GMAC. Some dealers have their own lease companies under the same roof. Others have third party lease companies in addition to the manufacturer's. Your best option is a manufacturer's lease company. Remember, lessee beware.

Want to make the best choice and save the most money?

Use the CarCalculator to figure out which payment plan works best and which will save you the most money. Whether it's a regular lease, one payment lease, balloon loan, or traditional loan, the CarCalculator can calculate, compare, and print payment schedules for all of these options. With the CarCalculator you will make the right choice, save money, and have peace of mind knowing you did the right thing based on your specific needs.