Difference between Buying and Leasing in Toronto
There are two main paths to car ownership -- buying or leasing. In recent years, the balance has been tipping toward leasing, especially for the luxury brands. That said, we'll explore some of the frequently asked questions consumers have about buying vs. leasing in Toronto, Canada.
Q. What are the three ways people buy a new car?
A. An all-cash deal, financing or leasing. The first option, of course, involves paying for the entire purchase with money. However, only a small percentage of consumers can afford this option. Most will elect to find a car and put at least some money down for a down payment or trade-in their vehicle. The rest of the funds are financed over the term of the contract.
Q. Do I actually own a leased car?
A. No. Although manufacturers count the lease as a "sale" for tracking purposes, the leased vehicle stays with you for a certain term, usually 36 months. Like financing a vehicle, you'll make monthly payments, but when your payments are done you either must return the vehicle or you have the option to purchase it for its predetermined value at the end of the lease term.
Q. Why would anyone want to lease if they don't automatically own the vehicle?
A. Leasing offers benefits that make this an attractive option for many consumers. First, leasing often allows shoppers to get behind the wheel of a more expensive vehicle than one that they could otherwise afford. This is possible because monthly payments are based in part on what a vehicle will be worth once the lease term is over. Second, leasing enables consumers to get a new car every two or three years. Sometimes, your personal needs change or your desire for a different type of model may warrant an update. Leasing allows you to return the keys to the vehicle and get another model with ease.
Q. Do I need good credit to lease?
A. Yes, absolutely. The same credit standards lenders use to gauge your creditworthiness when financing a car applies to leasing. This means the lender will look at several factors, including your credit score, income, employment history, your ability to repay the debt and your credit history. It is always a good idea to monitor your credit and fix discrepancies that may lower your score. Even then, work with your salesperson to explore all your options -- you may not have considered all options. Your dealer can certainly help you here.
Difference: Buying v. Leasing
There are other matters to consider when leasing, including annual mileage limits, maintenance, excess wear and tear fees, and taxes. Your salesperson will help you explore your full costs, enabling you to make an informed decision on whether to finance or lease your next vehicle.