Looking to get a new or used car? You’ll have to make the decision between leasing a car or buying it outright.
The team here at Falcon Auto Leasing has created this guide to help you determine which option is best for you. There’s a lot to cover, so let’s get started!
What Is A Car Lease?
A car lease is an agreement between you and a leasing company—in exchange for monthly payments, the leasing company gives you the right to drive the car it’s leasing to you. This means that you don’t actually own a vehicle you lease. The average car lease term typically runs for 24 to 36 months; car leases also typically feature maximum yearly mileage limits.
How Car Loans And Leases Differ
Unless you pay cash for a used or new car, you’ll need to get a loan if you want to buy outright. You’ll have to make a monthly payment either way—the difference is in whether you’ll need to make monthly loan payments or a monthly lease payment. So, what’s the difference?
Car loans are financing agreements used to buy vehicles. In a car loan, you borrow money (from a bank, dealership, or other source of financing) and use the money you borrowed to purchase your vehicle. You’ll then pay back that loan with interest.
Leasing a vehicle is slightly different; you’re not borrowing money, but borrowing the vehicle. This means you don’t own the vehicle outright, but it also changes the nature of your financing a bit—and that can have a positive impact (especially for businesses).
Pros And Cons Of A Car Lease
Pros
- Lower monthly payments
- Lower down payments (or no down payment)
- Less stress on your financing options
- Many leases come with warranties for maintenance
- You can change vehicles every few years
- Potential tax advantages, especially for businesses
Cons
- Mileage restrictions
- Potential charges for excessive wear and tear
- Less flexibility when it comes to selling the vehicle
- Additional insurance may be needed to cover the full value of the vehicle in an accident
Pros And Cons Of A Car Loan
Pros
- You own the vehicle outright
- If you use the vehicle for a very long time you can save money in the long run
- More flexibility when it comes to how you use the vehicle
Cons
- You may need a higher credit score
- Monthly payments and taxes tend to be higher
Leasing Vs. Buying Summary
| Leasing | Buying |
| No ownership; you pay for the right to drive the vehicle | You own the vehicle |
| Lower to no down payment | Higher down payment |
| Lower monthly payments | Higher monthly payments |
| Better if you always want to drive the newest model cars | Better if you want to hold onto the same vehicle for a long time |
| Option to buy or return the vehicle when the lease is done | Once you’re done with the vehicle, you have to sell it or trade it |
| Mileage restrictions | No mileage restrictions |
| Modification restrictions | You can modify your vehicle |
| Use restrictions (charges for extra wear and tear) | You can use your vehicle for off-roading and other high-wear activities |
| Costs can vary at the end of the lease | Costs are easily calculated |
| Lower short-term cost | Lower long-term cost (if you keep the same vehicle for a long time) |
Don’t Forget To Negotiate
With both car loans and car leases, it’s important to negotiate. Using tools like the Canadian Black Book, you can determine the fair market value of a vehicle you’re looking for; this can help you negotiate the right purchase price or initial value for the vehicle.
Taking the time to understand what loan and lease terms mean can also help you negotiate. We recommend doing research into vehicle negotiation tactics; negotiating is time-consuming but can save you hundreds (or even thousands) of dollars.
Conclusion
There are advantages to leasing and advantages to getting a loan; the one that’s best for you will depend on a number of different factors. If you’re looking into getting a vehicle, we highly recommend looking into both leasing and loaning to find the right terms for your needs.
Want to lease a car in Winnipeg? Our team can help; reach out to us today.
