Car Lease Vs Finance - Is it Better to Lease a Car or Buy a Car in Canada?

If you're about to visit a car dealership, you've probably asked yourself: Should I lease or finance my next vehicle? Understanding the difference between leasing and financing is key to making a confident, well-informed decision.

After our breakdown of leasing vs. financing, you will be able to make your final decision with more confidence. Compare the pros and cons of car lease agreements to find out what suits you the most!

If you're considering a car loan in British Columbia, understanding how financing works is especially important to ensure you get the best deal.

What is Leasing a Car?

A car lease is an agreement made with a car dealership. In the lease agreement, you agree to return the car at the end of the lease and pay for the car through monthly payments. It is like a long-term rental agreement, where you can rent a car for up to 2-3 years. At the end of your lease, you may be able to buy the car or return the vehicle. It depends on the lease agreement.

Read More: When Is Best Time to Buy a Car in Canada? Insider Tips Revealed

What is Financing a Car?

Financing a car means you need to pay off a loan at the car dealership, after which you can buy the vehicle. You will have full rights to own the vehicle at the end of the car loan Vancouver. You can choose to finance a vehicle if you want to keep the car long-term. 

Car Lease Vs Finance: Which One Should You Choose?

Is it better to lease or finance a car? Let's find out which one is best for you:

Car Lease: When Should You Rent a Car?

You should lease a car if you are okay with the following:

• If you don't want to build equity in an asset.
• If you don't want to own a car long-term.
• If you want to drive a new car every two to three years.
• If you want to pay lower monthly payments during the lease term. 
• If you want to drive a car with the latest technology, every few years.
• If you need a car, but you can only afford one through lease payments.
• If you don't want to pay down payments.
• If you want to enjoy the benefit of warranty-covered repairs.
• If you are fine with mileage restrictions within a leased vehicle.
• If you are okay with the early cancellation penalties involved within the lease term.

Car Finance: When Should You Buy a Car?

You should finance a new or used car if you are okay with the following:

• If you want to build equity in an asset.
• If you want to own a car long-term. 
• If you want to sell your car when you need to.
• If you are okay with the higher costs in the monthly car payment.
• If you want to customize your car in any way you want to.
• If you want to be free from payments every month within a few years.
• If you are okay with the maintenance and repair costs every month.
• If you need more flexibility before the lease ends. 
• If you don't want any mileage limits during the financing period. 
• If you want a less restrictive option where you can end the loan early with more ease.

Read Also: Does Financing a Car Build Credit in Canada: A Detailed Guide

Pros and Cons of Financing a Vehicle

Is leasing better than financing? What are the downsides of financing a car? Let's find out:

Pros of Financing a Car

• Complete Ownership: You can own the car after the loan term ends and enjoy the benefit of building equity in the vehicle.
• First Nation Financing: You can opt for First Nation Financing in British Columbia. This allows you to buy a new car without needing to pay for any taxes.
• More Flexibility: You can sell, trade in, or keep the vehicle after you finance a new vehicle. You can also end the loan term with fewer restrictions when compared with terms in a car lease.

Cons of Financing a Car

• High Cost: The monthly costs are much higher when compared with leasing a vehicle. If you are planning to own a vehicle long-term, then you will be saving more money by financing a car.
• Depreciation: The value of the car depreciates by 15-20% as soon as you walk out of the dealership. 
• No Warranty-Covered Repairs: You will be responsible for the wear and tear of the vehicle when you finance a car. You'll need to look after the maintenance and repair costs.

Pros and Cons of Leasing a Vehicle

Is leasing or financing better? A car lease may be a better option for you. You can find out more here:

Pros of Leasing a Car

• Low Monthly Payment: Is leasing cheaper than financing? Yes! You don't need to pay a high amount of money like you would need to in a car loan rates British Columbia. 
• Drive a New Vehicle every other year: You can drive a new vehicle after the lease ends every few years. If you love to drive new vehicles and don't want to own a car, then leasing a car is worth it.
• Business Deduction is Easier: If you use the leased vehicle for business-related work, then you can claim the tax deduction from your income. 

Cons of Leasing a Car

• You can't Build Equity: A lease agreement allows you to rent a car. This is why you can't build equity, even if you decide to purchase the car at the end of the lease period. 
• Mileage Restriction: Lease agreements come with mileage restrictions. This makes it difficult for you to lease the vehicle if you need more mileage.
• Penalties from Early Cancellation: You need to pay a hefty penalty if you end the car lease agreement early.

Read More: Zero Percent Financing on Cars In Canada: Is It Truly Good Deal?

Conclusion

Whether it is better to lease or finance a car depends on your needs. You should evaluate your needs before you finalize your decision between leasing and financing a car.