Is it Better to Lease or Finance a Vehicle in Canada?
If you have ever bought a new car or thought about buying one, there’s a good chance you have tried to determine if you should lease or finance it. The real question is, which one is better? Like most things in life, there are pros and cons to both, and although personal preference does play a part in your decision, so does your credit history and the vehicle you are purchasing and what the dealership will offer.
Let’s dive into it. For starters, what is the difference between a car lease and car financing? We’ll get into each one more specifically in a bit, but in the (most) simplest terms, leasing a vehicle is like renting a vehicle where at the end of the lease term(rental term) you have to return the vehicle. Yes, there are options beyond that but that’s for later. Whereas with financing (car loan) after a period of time making loan payments, you own the vehicle outright. If you based your decision on whether to finance or lease on that simple definition of each, it would seem like a no-brainer to finance. But, it’s obviously not the choice for everyone, and if it was, we wouldn’t be writing to inform you of the differences.
Leased Vehicle
As mentioned above, think of a leased car being kind of like a long-term rental. Instead of making monthly payments that ultimately pay off the vehicle, you are making a monthly lease payment that covers the cost of depreciation to a Canadian leasing company every month to drive it. Typically a lease agreement lasts anywhere from two to four years and at the end of your lease, there’s an option to buy out the vehicle.
The benefits of leasing your next vehicle are lease payments usually have lower monthly payments since you aren’t paying toward paying off the entire vehicle, you always have a new vehicle, and you don’t have to worry about maintenance since most come with a warranty. On that note, if you are leasing a vehicle that is a used car, make sure the warranty is still valid as that is one of the most significant benefits of leasing over financing a car.
On the flip side, there are a few cons of a lease contract. Unfortunately, since you are “renting” the vehicle, you can’t establish any ownership equity and lease agreements always come with a mileage clause meaning you can only add a certain amount of kilometres to the vehicle each year without being charged an additional amount. Although everyday wear and tear are factored into your monthly car payments, if the leasing company feels you had excessive wear on the vehicle, you could be responsible for any damages and repairs. Similar to signing a lease agreement for a house or apartment, some penalties arise from terminating the lease early, such as paying the remaining amount owing on the lease, an early termination fee, and having to cover the cost of the negative equity. Don’t think of that as daunting or a reason not to lease, just be careful and read the disclaimer and fine print.
Financing Your Next Car
Just like leasing a vehicle has its pros and cons, so does financing one. Financing is a better option for those who want to eventually own their vehicle at the end of the term. In addition, financing is usually easier to qualify for than a lease because when you lease a vehicle, you aren’t paying down the value, the dealership is breaking even on the depreciation. Whereas when you make payments on a car loan you are paying down the cost of the vehicle and lenders then have a tangible item to sell should they need to if you are unable to make your required car payments. Okay, okay, we got a little negative there; back to the pros. If you are someone who loves the idea of being payment-free, financing is definitely the option for you. Yes, a car loan usually has higher monthly payments than a lease, but (if) over time you continuously lease a vehicle and never own one, that amount works out to way more. You can also lower your monthly car loan payments by having a down payment or using your current vehicle as a trade-in.
Going with a car loan with the commitment to own the vehicle one day allows you to customize your vehicle because you can custom order whatever you want if buying a new car. If buying a used vehicle you can still finance and customize it by doing whatever modifications you want to it. Forget worrying about mileage; it’s your vehicle, drive it as much as you want, but keep in mind, once the warranty runs out, you are responsible for repair costs. One of the best parts of financing a vehicle is you can often qualify for lower interest rates if you have good credit.
When you decide to finance a car, we think you should definitely do it with us; finance and buy it from us. Why? Well, for one, we’re awesome, and two, we make it super easy. So easy, you don’t need to move as you can qualify for financing from right where you are, and then you can shop and buy the car from the same place - online, or come and buy your car in-store.
Car Insurance
There are quite a few differences between leasing a vehicle and financing, but when it comes to car insurance, there’s no difference. Insurance companies in Canada don’t care if you have a short-term lease or seven-year auto loan; they just need to see that the vehicle is in your name. Nor do insurance companies care about your credit score or whether or not your credit cards are over their limit. They simply look at your driving history and calculate your insurance costs from there.
We know we are at the end of the article and we didn't definitively say if it’s better to lease or finance a car - sorry! But, we did present both sides of the debate, and I think we can all conclude that it comes down to what works best for you and your lifestyle.
What we can definitively say is that no matter where you live in Canada, buying your next vehicle from us (FFUN Cars) is the most convenient way of buying a car. Have fun shopping and adding vehicles to a virtual garage, enjoy a 360° virtual tour, view the free CARFAX report and 92-point inspection report, then complete the purchase online or in-store and all you have to do is wait for us to deliver your new car or pick it up at FFUN Cars. That’s right, you don’t have to leave your house, if you don’t want to.
