What to Know About Leasing a Car: Is It a Good Idea For You?

What to Know About Leasing a Car: Is It a Good Idea For You?

Posted on May 23, 2022

Are you in the market for a new car but not sure whether to buy or lease? Our Burlington auto loans team are going to give you the information you need to make the right decision.

The car market in Canada is experiencing unprecedented growth; with the push for greener vehicles, you are going to be spoiled for choice.

Since we are on the topic of choice, are you going to be getting a conventional, hybrid, or full electric EV?

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There is no right or wrong answer; it comes down to budget and personal preferences. EVs offer long-term savings when you compare the cost of electricity to the rising costs of gasoline throughout Canada.

The drawback to buying an EV is the high upfront costs and lack of charging infrastructure in rural parts of Canada.

In five to ten years, the infrastructure should be more extensive, but we are dealing with what is currently in place.

Leasing is not renting

One common misconception that people have when they lease a car in Burlington is that you're renting it, you only have the vehicle for a defined period of time, and there is no equity built up in the vehicle.

When you buy a car, at the end of the loan, you own the vehicle, and whatever remaining value the car has is your owners' equity.

In the past, depreciation would impact the resale value of your car, but that is no longer the case; used car prices in Canada are at historic highs, so whether you lease or buy the car outright, it is going to retain most of its value.

When you lease a car, there are limitations in place to ensure the vehicle preserves its resale value.

Source: mint.com

You are limited by the number of kilometers you can drive per year of the lease; this is usually 20,000KM; anything over that amount, and you must pay a per kilometer fee.

The car must be returned in an excellent state of repair; anything beyond reasonable "wear and tear" will cost you.

Buying usually makes the best sense unless you are a business, then leasing has more tax advantages.

Your credit score impacts your ability to lease a car in Burlington

Your credit score needs to be high to qualify for a lease; when you buy a car, you own it outright; provided you make the payments on time, the lender does not have to worry about your returning the vehicle at the end of the agreement.

With a lease, they cannot afford to give a car to someone who is not going to be responsible, so the underwriting requirements are more stringent.

Source: valuepenguin.com

Since you are most likely going to buy a car and not lease it, your credit score should be over 600.

Suppose your credit score is low, or you are having some difficulty documenting your income.

In that case, you should reach out to a local dealership in your area. These dealerships will help you secure the best financing terms and show you how to rebuild your credit.

Now that you understand the primary differences between owning and leasing a car, why not contact your dealership and go for some test drives.

We’d love to help you lease a car in Burlington. 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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