When you’re on the search for a new car, deciding how to finance your purchase is obviously an important part of the process. Leasing and buying a car in Canada each have their own advantages, and the decision between the two depends on individual preferences, financial circumstances, and driving habits. Let’s compare them to see which will work best for you!
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Advantages of Leasing
Lower Monthly Payments
If keeping monthly payments low is a concern for you, look seriously at leasing your new car. Lease payments are typically lower than loan payments, allowing you to drive a newer or higher-end vehicle for a more affordable monthly cost.
Newer Vehicles
Lease contracts typically run for two to three years, although it is possible to get one for as long as five. At the end of the lease, you will be able to return it and move on to the latest model car. If driving a new car with access to the latest features, safety technologies, and improved fuel efficiency is a priority for you, then leasing rather than buying a car makes a lot of sense.
Lower Repair Costs
Since leased vehicles are typically under warranty for the duration of the lease, major repair costs are often covered by the manufacturer. This can mean considerable savings for you over the term of the lease. Essentially, if you get into the habit of leasing rather than buying, you may never have to pay a big repair bill on your vehicle.
Reduced Maintenance Hassle
When you return your leased vehicle to the dealership at the end of your contract, the dealer will be putting that car up for sale as a used vehicle, so the better condition it’s in, the more money they can make off of it. Regular maintenance is very important, and some dealers may include free maintenance packages for oil changes and tire rotation as part of the deal, or offer a maintenance package at a reasonable price. It’s one less thing to worry about!
Tax Benefits for Business Use
If you operate your own business, leasing rather than purchasing can make a lot of sense. While loan payments aren’t tax deductible, you can write off at least a portion of your lease payments as a business expense. Talk to your tax accountant to find out if this approach will benefit you at tax time!
Flexibility at the End of Lease
At the end of the lease term, you will have several options available to you. If you really like your current car, you can choose to buy it. On the other hand, if you want a new car with the latest features, you will be able to lease a new one. Finally, once your obligations under the lease agreement have been settled, including any fees, you can simply walk away and buy another vehicle.
Advantages of Buying a Car
Ownership Equity
Owning versus leasing is the same as the difference between paying a mortgage versus paying rent. Even if you start with a loan when purchasing a new car, you will build up equity in it over time as you pay down your loan. Then, when the loan is paid off, you own the vehicle outright. You can then trade in your car and use your equity as a down payment on a new vehicle, or sell it for cash through Autozen’s online auction. On the other hand, when your lease has ended, you won’t have any ownership of the car, and nothing to negotiate with when buying or leasing your next car.
No Mileage Restrictions
One of the real downsides of leasing is the mileage restrictions that penalize you if you go over a set number of kilometers over the term of the lease. That can add up to a hefty fee when the lease ends and you return the car. Unlike leases, owning a car means you can drive as much as you want without incurring extra charges.
Customization
If you want an upgraded sound system or tinted windows, you can make those alterations on a car you own without any issues. If you’re leasing, however, you may find yourself having to pay to restore the car to its factory condition when the lease ends.
Long-Term Cost Savings
While monthly loan payments may be higher than lease payments, owning a car for an extended period can result in long-term cost savings. Once the loan is paid off, you will be free of those obligations until it’s time to buy another car. However, lease payments continue as long as you have the vehicle.
No End-of-Lease Charges
Once you’ve paid off your loan, there’s nothing more for you to pay. At the end of the loan term, there are no excess mileage or wear-and-tear charges, as the car is yours to keep. However, when returning your leased vehicle, you may find yourself on the hook for excess mileage and wear and tear on the vehicle. Consider this when looking at those lower monthly payments!
Flexibility to Sell or Trade-In
Car owners have the flexibility to sell or trade in their vehicles at any time, allowing them to capitalize on the vehicle's residual value. On the other hand, you can pay a substantial penalty for trying to get out of a lease agreement early.
Considerations
Mileage and Usage Patterns
Consider your average annual mileage and whether you prefer having a new car every few years or owning a vehicle for the long term. If you have a long daily commute or often drive long distances to visit family or for recreational travel, you will soon exceed your mileage allowance on a leased vehicle, and owning one makes a lot more sense.
Financial Situation
Evaluate your budget, including upfront costs, monthly payments, and long-term financial goals. Are smaller lease payments going to be more of a benefit than no end-of-lease fees? Or is gaining equity through paying off a loan a more desirable goal for you?
Maintenance Preferences
Assess whether you prefer a hassle-free maintenance experience with a leased vehicle or if you're comfortable managing the maintenance of an owned car.
Ultimately, the decision between leasing and buying depends on personal preferences, financial goals, and individual driving habits. It's advisable to carefully weigh the pros and cons based on your specific situation before making your decision.
