So you’re in the market for a used vehicle and wondering which way to go–whether to finance or lease?. Let’s talk about it!. There are benefits to both, and we’ll explain them so you can be prepared when you visit a Finance Expert in person.
And when you do decide to come visit a lender, they’ll happily guide you through the process in a timely manner that revolves around you and your family’s schedule. They might even bring a little fun into the experience! At Used Cars Canada we believe the process of leasing or financing your next vehicle should be every bit as pleasurable as driving it.
Did you know financing and leasing are the two most viable options for acquiring a vehicle?
Financing a Vehicle
When you decide to finance a vehicle, you agree to pay over time for the entire cost of the vehicle, regardless of how many miles you drive or how long you keep it. Monthly payments are greater compared to leasing. Typically, you make a down payment, pay sales taxes in cash or roll them into your loan, and pay an interest rate calculated from your credit score. You make your first payment a month after you sign the deal. Later, you’re able to sell or trade the vehicle for its depreciated resale or trade value.
There are several things to consider when it comes to financing. For example, you’ll want to think about how much you want to spend each month for your transportation. Once you have that monthly payment, with the help of the lender, you can determine which vehicle will best fit your budget.
Leasing a Vehicle Instead
Let’s take a look at the advantages of leasing a vehicle in Canada. When you decide to lease, you pay only a portion of a vehicle’s cost, determined by how long you own the vehicle (lease term) and how many kilometres you drive. Leasing is a form of financing, but with some similarities to renting. At the end of the lease, you won’t have ownership of the vehicle.
You have the option of not making a down payment, you pay sales tax only on your monthly payments, and you pay a financial rate that is similar to the interest common with loans. You might be required to pay certain fees and possibly a security deposit, which you wouldn’t pay when financing. At lease-end, you’re able to either return the vehicle or purchase it for its depreciated resale value. You might be charged a lease-end disposition fee.
Lenders offer leases for a variety of terms. Generally, lease programs allow for many kilometres of driving per year, subject to vehicle choice. The numbers are generally based on the average distance Canadians drives in a year.
When you choose a shorter lease, you’ll have the opportunity to drive a completely different vehicle every few years. Or if the vehicle is within the kilometre limit detailed in the lease agreement and has no abnormal wear and tear, you can simply return it instead. Purchasing the vehicle at the end of your lease is another option you can consider! Leasing certainly sounds appealing, doesn’t it?
A Summary of the Differences Between Financing vs. Leasing a Car
| The Advantages of Leasing a Vehicle in Canada | The Advantages of Financing a Vehicle in Canada | |
| Ownership Options | You pay for your vehicle only during the term of the lease and then return it at lease end, unless you choose to purchase it. | After your financing obligations are met, you become the owner of the vehicle. |
| Monthly Payments | Monthly leasing payments are generally lower than monthly financing payments for a comparable vehicle. | Monthly car-loan payments are higher than comparable leasing rates because you are paying for 100% of the value of your vehicle. |
| Kilometers | You can choose from different kilometer options for your lease. You are responsible for any excess-kilometer charges unless you choose to purchase the leased vehicle. | You can drive unlimited kilometers; however, if you ever choose to sell your vehicle, a higher number of kilometers on it will affect its resale value. |
| Customization | You can customize your vehicle with approved accessories. | You can customize your vehicle however you like! |
| End of Contract | At the end of your lease, you have the option to either purchase the leased vehicle or return it to the lender. | At the end of the term of your loan, the vehicle is fully yours |
| Wear and Tear | Normal wear and tear is covered, but you are responsible for excess wear and tear. | There are no charges for excess wear and tear, although it can lower your vehicle’s resale value. |
That Covers Everything!
We hope all this makes sense to you, but should you have any further questions about financing or Leasing , or are interested in securing a plan for yourself, contact us at Used Cars Canada. Our Finance Experts are looking forward to talk with you and discuss your financial and transportation needs and options.