If you’re in the market for a new vehicle, you might be considering leasing versus buying. There are advantages to both. The option that’s best for you depends heavily on your preferences, goals, and budget. To help with your decision, we’ve put together a list of pros and cons for leasing and buying a car.
Leasing A Car
Leasing a car in Canada is a smart option for someone who doesn’t want to own a vehicle later on. A car lease allows you to drive a brand new vehicle for a fixed period at an agreed monthly rate. To make things even easier, leasing doesn’t require a car loan approval or a hefty payment up front. However, unlike typical financing plans, monthly lease payments go toward the use of the vehicle instead of the ownership of the vehicle.
If you’re considering leasing, remember to lease is to have a long-term rental. Once the fixed lease period is over (typically between two to four years) then you must either return the car to the leasing company, or purchase it for market value.
Pros of leasing a car:
- Leasing a car always keeps it under warranty. You save on big mechanics' bills, as newer cars break down less frequently than older ones.
- You can enjoy being able to drive a nicer vehicle that you might not be able to afford if you purchased it outright.
- A monthly lease payment is usually less than a monthly car loan payment.
- Those who lease their car do not have to pay interest rates and avoid the depreciation of the value of the car.
- If you are a self-employed person or business owner, you may be able to deduct the cost of the lease.
Cons of leasing a car:
- There is a limit on the number of miles you can drive your leased vehicle. If you go over this limit, you will have to pay a hefty fee.
- You can't enjoy any improvements you make to the car when you lease it, and after the lease is over, you lose the money you've put in it.
- The dealership will inspect the car or truck for wear and tear at the end of the lease and charge you accordingly.
- You may also be charged if you make any significant changes to the vehicle.
Buying A Car
So what happens when you buy a car in Canada?
Purchasing a car will involve time and research. At its core, it’s about:
- Finding and test-driving the vehicle you want
- Securing financing
- Negotiating a fair price
- Signing the paperwork
In Canada there are two ways you can buy a car:
- From a car dealership
- From an individual selling their car privately
If you want to buy a new vehicle, you can only do so from a dealership. You can buy a used vehicle from either a dealership or a private seller.
Pros of buying a car:
- When you finance or pay cash for your vehicle, there are no mileage restrictions.
- You can customize the vehicle you purchase however you wish.
- Once the vehicle is paid, you no longer have those monthly payments.
Cons of buying a car:
- Depreciation is part of purchasing a new car.
- Most dealers require 10 - 20 percent down when you buy a new car. If you don't have that kind of cash to put down, leasing may be a better option if you still want that sparkly new vehicle.
- Consumers who purchase their car often have higher monthly auto loan payments than a lease payment.
Leasing Vs. Buying
Here are key factors you should consider when choosing whether to buy or lease:
- Financial goal
- Investment goal
- Financial budget
- Value for money
- Usage and need
Deciding whether to buy or lease your next vehicle ultimately comes down to what you’re comfortable with and what your goals are.
Make Sure You Are Protected With The Right Car Insurance
Whether you decide to buy or lease, it’s important to have the right insurance. Going with an insurance broker gives you peace of mind, which is something you can’t buy elsewhere. A BrokerLink insurance broker will take the time to get to know you. This will ensure you walk away with affordable car insurance that makes sense for your life.
Should I Lease or Buy My Next Car FAQs
Are there different requirements for car insurance if I lease a car?
The legal requirements are the same whether you buy or lease your vehicle. However, depending on the company you lease your vehicle from, the process of securing insurance may be different. They might secure coverage for you, or you may have to secure coverage on your own. Even if the leasing company offers insurance coverage of some kind, make sure you know exactly what is and isn’t covered. You may need to purchase additional coverage so you are fully protected.
What month is best for leasing a car in Canada?
New models come out in January. This means if you’re looking for a deal, the best time to lease or buy is usually in December. This is when dealerships are looking to get rid of old inventory to make room for new models. However, if you’re looking for the latest model, you’ll want to shop in January.
Is it a good time to buy a car during the coronavirus pandemic?
Yes and no. Finance rates are low, which is an advantage for buyers. However, many folks who no longer want to take public transportation are in the market for a vehicle. As always, do your research and consider all your options before making any decisions.