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Differences Between Leasing and Buying a Car: Which is Best?

Differences Between Leasing and Buying a Car: Which is Best?

If you are in the market for a new car, you may be deliberating whether to purchase the car outright or take a lease and are unsure on the differences between leasing and buying a car.


While the lower lease payments at first glance may seem like a great deal, you could be setting yourself up for financial hardship in the future.


The average car payment in Canada is $570 per month, while a lease is $490 per month, which is why this is a pertinent question.


Leasing is just like renting right?


A common misconception about leasing is that it is just like renting a car but for a longer period of time. In reality, a lease is similar to renting, but you have the option to buy the car at the end of the agreement at a predetermined price.


Each lease payment you make only covers the depreciation of the vehicle plus interest, so you build no actual equity in the car.


On the other hand, when you buy a car, although you are making monthly payments on the vehicle like the lease, with each payment, you are building some equity.


In the past, depreciation would dramatically impact the amount of equity you could build in a new car.


Still, with the current car market, prices are steady, so the resale value of your car will hold for quite some time.


You need strong credit for a lease


While both of these financial products appear to be the same, you make monthly payments and get to use a car, in reality, it is not the same.


With a car, you own it, so whatever happens to the car, you are still responsible for the entire amount financed.


Source: thebalance.com


When you lease a car, you are responsible for the amount of depreciation plus interest; this puts the lender at increased risk, so they want to shield themselves by only offering leases to Canadians that have good credit.


To secure competitive interest rates, your credit score needs to exceed 680, but to get the best terms on a lease, your credit score must exceed 720.


If you are facing credit challenges, you should buy the car instead of leasing it. Generally speaking, unless you are running a business where you can write off the payments, you should go forward with the car loan.


Where to access the most competitive car loans in all of Canada


While the Internet might seem like the most viable option when looking for a great car loan, you would be wrong.


The best source of car loans in Canada can be found at your local car dealership. These dealerships have access to lenders all over Canada, so you can rest assured you will be getting the best deal based on your credit.


If you are having credit issues, the dealership has credit experts who can show you how to improve your credit.


You should contact the dealership today and start reviewing the various available options and they'll tell you more about the differences between leasing and buying a car. Interest rates are going to rise throughout the year, so you need to lock in a great deal now before things get more expensive.


We’d love to help you find a new (to you) car. Simply fill in the form below and we’ll get back to you ASAP or see our selection of new and used cars at our Burlington dealership. 


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    Categories: Auto Loan

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