Buying a car is an important decision that can impact your finances for years to come, which is why you need to take the time to thoroughly research your options before you sign on the dotted line. If this warrants taking a quick should I buy or lease a car quiz. That being said, making this purchase can be overwhelming with all of the confusion and complexity that surrounds car shopping, unless maybe you are Nick Sandmann LOL. That’s why we’ve created this guide on buying vs. leasing a car in Canada, complete with information on what it means to lease or buy a car in Canada and some helpful laws governing both options.
If you’re leasing your next car, it is significantly less expensive than buying, but it also means that you are only renting the vehicle for a set period of time. If you decide not to extend your lease (or if it expires), you simply hand over the car, keys and all. With a purchase, although you will have to make monthly payments until your loan is paid off in full (usually after four years or 60 months), the car is yours to do with as you please, including selling or trading it in for another vehicle.
This guide will help you decide if leasing or buying a car in Canada makes more sense for your lifestyle.
Leasing
The Pros of Leasing a Car in Canada:
1. You can get a new car every few years:
One of the biggest advantages to leasing a car is that you have the opportunity to drive new cars. When you lease your vehicle, you typically have the option to get a new car after 24 or 36 months. When this happens, you will be given the opportunity to drive (and keep) your new vehicle for the remaining duration of your lease. This means that if you like how this one drives and feels, you can switch it out for another one before your lease ends with no penalty (except possibly an early termination fee). However, this doesn’t mean that leasing is always less expensive than buying.
2. Leasing can be cheaper than buying:
If you decide to trade in your old car for a new one, the price of your lease will typically include the value of your trade. This means that you won’t have to pay any money out of pocket to get into a brand new vehicle. However, if you decide to sell or trade in your vehicle (instead of trading it in), this can actually save you money because you won’t have to pay an early termination fee and any other remaining costs will be deducted from the sale value and price of the car. That’s why it is important to understand how leasing works before deciding if buying or leasing is better for you.
3. Your monthly payments are usually lower:
Another advantage to leasing is that the payments are usually significantly lower than the payments for a car loan. This means that you won’t have to put as much money down when you sign your lease and can drive your new vehicle home without putting any money down at all. Although it is important to understand that these low payments mean you will be driving a more expensive car than if you purchased it.
4. Don’t plan to drive the car for more than a few years:
If you know that you won’t drive your vehicle for more than a few years, leasing can be the better option. This is because if you buy and pay off your loan early, you will still have to pay taxes on an asset that is depreciating in value as opposed to taking it back with you when your lease ends.
The Cons of Leasing a Car in Canada:
1. The payments are high:
Although monthly lease payments are lower than buying, they can still be quite high. In some cases, even if you are purchasing the vehicle at the end of a lease, you may still be paying high monthly payments on top of any accumulated finance charges. This is because they are typically calculated on a percentage of your vehicle’s value and will never be as low as what you would pay if you financed your car. Therefore, it is important to know whether you want to drive for several years or merely for a few months before deciding whether leasing or buying makes more sense for your situation.
2. You don’t get all the perks:
When you lease, the dealership is the one who gets all of the money from your monthly payment (as opposed to financing an entire loan). Therefore, the dealership gets all of the perks (like warranty coverage) without having to pay anything out of pocket. If you are leasing, this means that you may be driving a vehicle with limited warranty coverage or even no warranty at all. And if you decide to buy your car, you will have these warranties and other benefits when they are available or covered under new car warranty.
3. You can’t really negotiate:
When you lease a car in Canada, there isn’t much that you can actually do to improve the buying or selling options once it is sold to another customer. This is because you are renting the car and are not purchasing it, which means that the dealer has total discretion over pricing. What this typically means is that if you want to buy the car or sell it at a later date, you have to do so at a price that works for them. While this isn’t always true, you should be aware that these arrangements can be difficult when it comes time to sell your vehicle or return it early.
Buying
The Pros of Buying a Car in Canada:
There’s no deposit: When you buy a car, there is usually no deposit required. And because you are also making monthly payments, you will never have to pay any money up front to get a car.
1. You get to keep all of your warranties:
When you buy a car, it comes with the entire warranty coverage that is usually part of the sale. However, be aware that some cars will specifically state that they come with limited coverage and won’t include all of the manufacturer’s standard warranty coverage. This means that if something breaks while you are still leasing, you may be out of luck since leasing doesn’t provide any warranty coverage in these situations.
2. You can negotiate:
When you buy a car, there is no one else involved. Therefore, you can negotiate the price and terms with the dealer to get a better deal. You also have the option to sell or trade your car without having to go back and renegotiate a final price so that they can sale it to someone else. Therefore, you will often be able to take your money in one lump sum when you buy a car instead of waiting until the end of your lease.
3. You can drive it forever:
If you finance a new or used car and pay off your loan early, there is nothing that stops you from driving it for years and years. This means that if you just want a reliable vehicle with no strings attached, buying might be the best option.
The Cons of Buying a Car in Canada:
1. You have to pay more:
When you buy a car, the price is typically significantly higher than the price of a lease. This is because you are paying for the vehicle itself plus any applicable taxes, tags and license fees. If you had to put any money down on your new vehicle, you would simply be paying for these other charges (and possibly much more) instead. Therefore, it is important to know whether you want to purchase your car outright or lease it.
2. You can’t finance the entire loan:
When buying a car, there isn’t much that you can do to improve the sales process once it is sold to another customer. This is because you are paying for the vehicle and not financing it. Therefore, there isn’t much that you can negotiate and you are typically stuck with the person who bought it.
3. You have to pay more if you trade it in:
When leasing a car, there is no money that needs to be paid out at the end of your lease. This means that you are able to make money by swapping cars when your lease is up or by selling them before your lease ends. However, if you buy a car and subsequently trade in another one before your lease ends, this will require several payments from your credit card on top of the monthly payments for the newer model. In some cases, this can be more expensive than if you just kept the car you purchased and paid off your loan early.
The Bottom Line
As you can see, deciding whether to lease or buy a car in Canada is a difficult choice. It all depends on what your goals are, how many miles you intend to drive in the near future and what type of vehicle it is. Don’t forget that most people who lease a car make the switch to buying their next car because leasing isn’t always an ideal financial situation for those that don’t have the money to pay it off early or want a reliable vehicle for years to come.
