Finance vs Lease
Learn the Benefits of Both Financing and Leasing a Vehicle
Is Leasing Better than Financing?
In Alberta, car leases are more popular than ever. About 25 percent of new cars are leased. Buyers are also choosing long-term loans to reduce their monthly payments. Leasing and financing both have benefits, but deciding between the two options isn’t easy. Use this guide to see what’s right for you.
Leasing a Vehicle
Leases allow you to drive a new car with high-end features while enjoying low payments. The cost is lower than a loan because you’re only paying for the vehicle’s depreciation during the lease term. Here’s how it works.
What is a Lease?
A lease is a contract that lets you rent a car for a specified period of time, such as 24 or 36 months. When you sign the papers, you commit to making monthly payments. You also agree to insure the vehicle fully and to maintain it. Fees apply at the beginning and end of the lease.
Why Lease a Vehicle?
Leasing can improve your cash flow so that you can increase your savings, make investments or support your family. Because taxes are assessed on your payments only, there are fewer surcharges. Depending on the model, you can spend 30 percent less than you would with a loan.
Benefits of Leasing
- It’s easy to upgrade to a new car at the end of the lease.
- Lease payments are lower, so they can maximize your budget.
- If you like the vehicle, you can buy it at the end of your lease.
- With a new leased vehicle, you’ll enjoy full warranty coverage at a lower cost.
- New and pre-owned vehicles can be leased.
Drawbacks of Leasing
- Your annual kilometre allowance is limited.
- Extra kilometres must be purchased separately.
- At the end of the lease, you don’t have equity.
- You have to maintain the vehicle.
- If the car is damaged, you must make repairs.
Leasing Options and Types of Leases
Traditional leases include a 24,000 km allowance. A low-kilometre lease has a ceiling of 20,000 km. If you drive more, you can purchase extra kilometres. Tax applies to these extras.
How Leasing Works
- You find a car that you like and work with our staff to negotiate a price.
- Then, you sign a contract that specifies the length of the lease and your responsibilities, such as insurance requirements and maintenance.
- You don’t need to put money down, but it will lower your payments.
- At the end of the lease, you can return the car or start another lease. You can also purchase the car by financing the vehicle’s residual value.
Buying a Vehicle
Purchasing a new or pre-owned Mazda with an auto loan can have financial advantages, especially if you don’t mind driving the same car year after year. The cost is about the same if you trade in your car after the loan is paid or return the car at the end of the lease. You can save more by keeping your car after you own it.
Why Purchase a Vehicle?
Financing might be a good option if you fit the following criteria.
- You can afford higher monthly payments.
- You’d like to build equity.
- You drive more than 24,000 km annually.
- You plan on keeping the vehicle after the loan is paid.
- You don’t need a new car every few years.
Benefits of Buying a Vehicle
- Payments increase your equity.
- Your vehicle is an asset that boosts your net worth.
- You’ll get money back when you sell or trade in your car.
- There’s no kilometre limit, so you can drive as much as you need.
- Putting more money down or selecting a longer term will reduce your payments.
Drawbacks of Buying a Vehicle
- Monthly payments are higher.
- After the warranty expires, you might encounter repair costs.
- Loans require larger down payments.
- A multi-year loan is a big commitment that requires budgeting.
- Interest rates add to the cost.
Questions to Ask Yourself
- What’s the purpose of the vehicle?
- Is the vehicle for business or daily driving?
- How many kilometres do I drive?
- Are my transportation requirements stable?
- How much car can I afford?
- Do I want a new car every few years?
- Do I want to keep my car longer?
- Is a car loan cheaper in the long run?
- Could a lease save me money even after the fees?
You should carefully consider your finances and driving patterns. If you drive long distances, a lease probably isn’t right for you. On the other hand, if you live in town and don’t commute, a lease might be optimal. You should also decide whether you enjoy driving a new car or prefer the familiarity and savings of an older model.
If you would like personalized advice, contact us at 587-409-4527, email us at [email protected] or fill out a credit application and we’ll get back to you right away. We can help you pick a car or truck that fits your budget and lifestyle.