Buying or Leasing a car in Canada?

Estimated reading time: 8 minutes

An interesting question when you are ready to get in to a car, do you buy or lease a car in Canada? Experiences differ from dealership to dealership and car to car. If you decide the long term, you might get yourself a great deal and might stick to the commitment you made.

The Difference:

There is a huge difference between buying a car and leasing it. Buying a car means that you are the owner of the car, you do as you please and it’s your to keep. When leasing a car, you are technically a renter, you will not even run it more than allowed KMs without incurring extra charges, maintain the car for the dealership and you will return it as you received it once it’s time. But of course, these are long term leases and are cheaper than renting a car from Enterprise, Avis, and Budget etc.

What is more Feasible?

A critical question! When deciding to buy or lease a car in Canada, you need to run the Pros and Cons of both in your mind before you move forward with a decision.

As I mentioned earlier, if you are deciding on leasing a car, you need to think 3 to 6 years. Why do you think that much in advance? You need to understand that the car you will lease might stay with you for at least 3-6 years to consider it reasonable. On the other hand, you bought a car, you drive it for as many years you want and then flip it to get in to another car.

Let’s get in to the details now.

Leasing a Car:

There are certain pros and cons for getting in to a leased vehicle. You judge for yourself once you are done with the list.

PROS:

• Newest model of any type of vehicle.
• New cars every 3-5 years
• Affordable and low monthly payments
• Low Interest Rate or 0% lease available with zero down at most dealerships
• Option to buy out the vehicle at the end of lease. Can be converted in to financing at the time of lease end – You pay taxes for the lease end value.
• You are the first owner of the vehicle and continue to be one if you lease a vehicle and then finance it for yourself.
• Better warranty protection

CONS:

• Limited Kilometers – pay extra if you go beyond the allocated limit (15K, 18K, 20K or 24K per year only)
• Price fluctuates with the increase in annual KMs required
• Maintenance is the responsibility of the lessee although you don’t own the vehicle. Goes under wear and tear.
• Car cannot be returned/changed without incurring penalties and extra costs.
• You cannot change any part of the vehicle cosmetically or mechanically to make it look different/better.
• Any issues with the car will have to be fixed or paid for when you return the vehicle.
• Not easy to find a customer to take over your lease. Lease transfer charges of approximately 1500 – 2000 CAD.
• Dealership owns the vehicle, you are considered a renter/lessee.
• Lease end experience can be miserable and long. Lease end inspections, waiting for charges etc.

“Overall, I am not a big fan of leasing a vehicle and prefer that you buy a vehicle out upfront or finance it. There are many reason and you will get to know them in the next section.”

Buying a Car:

Leasing a vehicle is a very lucrative deal when you walk in to a dealership. But then again, it doesn’t compare to buying the vehicle. Here are a few pros and cons that you might want to consider:

PROS:

• Own the vehicle yourself. Limited liability.
• Can do what you like with the car – Upgrade as you please, cosmetic or mechanical
• Road Trip around Canada and stay on the road forever, never worrying about mileage being used
• You can switch cars and change if you are bored of the vehicle – Consider wastage of taxes paid on vehicle purchased.
• It is an asset that you can consider selling when you want to. Depending on car, might not lose most of the value paid.
• Can buy any vehicle of any value and any model depending on your affordability.

CONS:

• Higher Interest Rates than Leasing on financing
• Full value of the vehicle to be paid
• Might not get the needed color of the vehicle if buying used

Recommendation:

So, do you buy or lease a car in Canada? I recommend buying a vehicle rather than leasing it. You do get to drive the latest vehicle when you lease in Canada but then it might not be easy to get out of a lease agreement. Instead of leasing a vehicle, you should go for buying a used vehicle two or three years older. Why?

A new vehicle out the door at the dealership incurs extra costs, like freight, PDI, AC, Shipping, etc. etc. The vehicle loses this value out the door, the grunt of which is taken by the first owner/registrant. Once the vehicle is out the door, it is a used vehicle with a registered owner. It comes back for resale and it is called a used car, now this vehicle is priced according to the market, year, make and model. You can check comparable prices on different platforms I discussed in my blog First Car in Canada.

Now, what do you check when buying a used car and how do you go about it?

Buying a Used Car:

I was looking for a new used car for myself in December. I had to get a larger vehicle to accommodate my changing needs, which always keep changing and there isn’t a constant that I have seen so far. Anyways, I first had to decide the make and model of the car that I would need. Then the search began.

I decided to check autotrader.ca but couldn’t find the right vehicle. Was on the app almost every day with the same criterions (Make, Model, Year and 100kms around my postal code). didn’t see anything. I decided that I will check all Toyota dealerships around me for the right car. I went with Google Map search. All dealerships came up in a list A-Z. I went in to every website, used car section and searched for the exact same car in my range and budget. It wasn’t available in many dealerships and the few that had them were either overly priced or the model was older.

I reached T for Thornhill Toyota and found the right vehicle. They had three and the one I was looking at was the right one. How do you decide on a used vehicle from the images, description and options?

Used Vehicle Checks:

1. Price range should be in the right range – +/- $2000. (Check same model, make, year and mileage vehicles and decide on an average price)
2. Carfax Report should be clean – No Reported Accidents – If you are ok with accident, the price will be lower and you will see the total claim amount of accident on the Carfax report. Anything below CAD 5000 is considered fine. More than that, would definitely be an extensive damage repair.
3. Consider buying from brand dealerships, Certified Pre-Owned are the best used vehicles you can get in to. I call these New Used Cars.
4. Check for any visible damage to the vehicle in the images. You can reconfirm the same once you are on the ground after an appointment to check out the vehicle.
5. Mileage of the car should be anywhere between 15000kms per annum to 20000kms per year used on average.
6. Anything below 100K Kilometers and less than 5 years is great because you have left over powertrain and drivetrain warranty available for most of the makes and models. Check with the dealership.
7. Consider visiting the store if you are 100% sure that you like the vehicle depending on a final inspection and a drive test at the dealership during the pandemic.

Thornhill Toyota Experience:

I had arranged for an appointment with Bergman Lopez at Thornhill Toyota and it was a pleasant and fast experience. He was knowledgeable on the options that were being offered and I knew what I was looking for. It worked out perfectly great. The deal was finalized after a Test drive and physical inspection of the vehicle, it took less that 2hours to get everything sorted and settled. It was the perfect vehicle and I wanted it (considering my ever changing needs). The deal was finalized and seen over by the Finance Manager Carla Zeballos who was also a great person to deal with. They made the experience pleasant overall and I finally had my new used beast. Follow-up and aftersales service is the core of any dealership’s services, they were great with their follow-ups and I am yet to see the Services Department. Sooner or later!

What do you think?

These are my thoughts my experiences but considering 16 years of buying and selling vehicles; seeing the lease options here, I am adamant that don’t get in to a lease. Avoid leasing and go for buying a new or used car. You would thank me later. I say, invest in a good car as it is an asset and you save most of the money you put in to the car, of course minus the normal depreciation that any vehicle goes through. But you do get some money back at the end to invest in your next best machine.

At the end, it is your car and it is your choice. You know what you want and what do you need it for. Think long but decide better. Hope you have a wonderful experience. Do let me know if the comments section if you think any differently. Stay home stay safe.

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