After you’ve settled in your new dream home, we guess you are exploring your options in cars as your next financial allegiance? There might be questions in your head that you might be struggling with, like what car to buy, what deals can you get, whether you should finance or lease a car? We can help you with this debatable question- leasing v/s financing a car in Canada. Let us now look closer to this and discuss the pros and cons of financing vs leasing a car in Canada:
Advantages of Leasing a Car in Canada
The following reasons enlist various advantages of leasing a car in Canada.
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- Options to Purchase: By the end of your car lease, you are free to either return the car to the dealership or you can actually buy the car. Some would actually prefer to lease another car, while others would want to keep the car and buy the one they’ve been using(Lease to Own). Either way, it is always nice to have the option. Buying a car in Canada, as the lease ends, would be a good option for people with bad credit and cannot clear their qualification for a car loan.
- Smaller Payments: As a generic thumb rule, lease payments are supposed to be much lower than the loan ones. Not only it is a given that these are more affordable, but you can afford a nicer car with your favourite accessories!
- Potential Tax Benefits: If you are leasing a car in Canada for business purposes and your employer is not paying for it, you can deduct the lease payments on your tax returns.
Disadvantages of Leasing a Car in Canada
The following reasons enlist various disadvantages of leasing a car in Canada.
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- Wear and Tear: This is one of the major disadvantages of leasing a car in Canada. It is a given that your car might experience minor wear and tear, but if the condition of the car exceeds that limit of wear and tear, then you would be responsible for fixing the damage. There can be situations where you will have to visit the auto shop suggested by the dealership for repairing.
- Mileage Limits: Leasing a car comes with limits on the kilometers you can actually drive. If you ever exceed the limit of the set amount, you would have to pay the surplus fee.
Now that we have a clear understanding of leasing a car, let’s analyze the pros and cons of financing a car in Canada.
Advantages of Financing a Car in Canada
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- Flexibility: This is for the people who are unsure about actually buying a car. Cancelling a financed car agreement bears way more consequences that cancelling a lease does. But, you can always feel liberated with the idea of getting rid of your car, according to your situation.
- Full Ownership: Once you are through with your loan payments, you can completely seek ownership of your vehicle. And it is always good to buy a car as a basic necessity of today’s lifestyle.
- Modifications: If you are looking forward to modifying you car, you can do the same when the car is completely financed. Leases, however, do not give you the permission to alter the car, even for the slightest bit.
Disadvantages of Financing a Car in Canada
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- Depreciation: Make sure you treat this as an item of purchase and not an investment. It is important to understand that financing a car in Canada leaves no scope for earning any profits. Most of the money that you would be putting down on cars would be just expenditure and wont come back to you in liquidation like an investment. While this remains the same with leases, they might be the more attractive option because they have lower costs.
- Negative Equity: While cars tend to depreciate rapidly, there is a possibility that you can collect negative equity on a financed car. These financed cars might especially be the ones with elaborative loan terms.
Its always best to lease a car if –
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- You are not ready for a long term commitment of a financed car.
- You are not that much into driving.
Apart from this, if you don’t want to take responsibility for the wear and tear costs, leasing might just be your thing. However, if you do need a car for a long period of time, and you can afford the big numbers, financing would be a better option for you to explore. However, at the end of the day, it is completely your decision and it depends on your lifestyle and financial choices, whether you want to lease or finance your next new buy.
Car Buying Checklist for Newcomers
In the debate of leasing vs financing a car in Canada , one needs to ensure they check the following requirements.
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Ensure and Secure Your Driver’s License
As a new immigrant to Canada, you might want to make sure that you have a validated driver’s license. Since, in some provinces, it is mandatory to have a Canadian driver’s license, it is only mandatory to carry one to legally drive here. However, in other provinces, you may be able to drive with your International Driving Permit
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Research Vehicles Online
You can visit the websites for car dealerships and other resources to buy cars and then compare the features, prices they are offering along with the customer reviews. This would definitely help you narrow down your choices, before you start shopping.
You can also check their history of selling and a report can help you gauge the quality of the website or what would they have to offer. Such reports can extremely helpful and can provide you with information about safety recalls and history for previously used vehicles.
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Are You Loaning or Leasing a Car in Canada?
In Canada, if people loan some money for buying a vehicle, two very common financing options are, 1. Signing a lease and 2. Taking out a loan.
- With a loan, you can actually borrow an amount upto 100% of the purchase price of the vehicle. When the loan is settled, you are free to own and use the vehicle.
- With a lease, you can literally get a new car every two or three years. Once the entire lease is through, the car is returned to the dealership. However, any scratches or wear and tear caused has to be paid by you.
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Test Drive Different Vehicles
Testing and finding the best vehicle at the best value is crucial, especially for used vehicles.
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Ask for RBC
Once you know, what car you are looking forward to buying, you can actually go for a negotiated price and ask your dealer for an RBC car loan.
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Know Your Monthly Car Payment and Commitment
Before you scroll and slide through multiple car dealerships, you can curate yourself a list or maybe a general idea of what you can commit financially. Make sure to include costs like fuel, parts, insurance and maintenance.
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Get a Car Insurance Quote
In order to operate a car in Canada, you must make sure to have a car insurance that protects you financially, even if you are taking risks. Automobile insurance is something that protects you, your vehicle and all third parties that are involved during any caused accident or theft. There are multiple plans available and the cost depends on the chosen plan, the driving record, living location, driving experience and of-course your age. It is no fact to mention, to shop at best rates and deals.
In Conclusion
Leasing vs Financing a car can be something that requires a lot of research and thought. Make sure you are thorough with your finances and have communicated to experts before coming on any decision. Both, Leasing and Financing have their own pros and cons and at the end of the day, its really your choice.
You May Also Read
| About Totaled Car in Canada | Tips for Canadian Electric Car Buyer |
| How To Buy a Car in Canada? | Financing for First Time Home Buyers |
Frequently Asked Questions (FAQs)
If you are someone looking for flexible options, leasing is the way you should go ahead with. But, if your finances and lifestyle allows, you can definitely buy yourself a car.
It is important to note that monthly financing payments are higher than for a lease. This is because they are based on the entire cost of the car.
Leasing can be an attractive option, if you look at the monthly instalments. On the other hand, buying a car means you own the entire equity and this option has proven to be the better financial option in the long run.
Leasing a car might require a higher insurance premium. This is because the company that leases you the car, technically owns the entire car and wants to make sure that the car is secured in any caused accident. Which is better, leasing vs financing a car in Canada?
Is it cheaper to lease or finance?
Is leasing a car a waste of money?
Is insuring a leased car more expensive?
