Buying vs leasing a car can be a difficult choice. However, leasing a car in Canada comes with various advantages. The different transportation options available in the country come with different costs slab. Hence, weighing every aspect, including car insurance, before finalizing your commute options is essential.
In this article, you’ll learn about leasing a car in Canada. But if you are looking for alternatives, like buying a new car, make sure to learn about car insurance.
If you have already decided to lease a car, follow the below steps to find the best deal. It will help you learn the answer to the question, “how does leasing a car work in Canada?”.
Understand the requirements of leasing a car
Here are a few important determinants of car leasing in Canada.
- Determine your credit score. It’s one of the important aspects considered by leasing companies when giving a car on lease. Ideally, applicants with a credit score of 700 are considered trusted and safe.
- The term length of the lease is the next important consideration to be kept in mind when looking for a car lease deal. Usually, it’s between 2 to 5 years. The longer the term, the lower the payments, which means higher interest.
- Plus, beware of the restrictions imposed on the use of the leased vehicle. For example- travelling distance is generally capped at 20,000 – 24,000 km per year.
Set your budget for a car lease
When creating a budget for leasing a vehicle, consider all its costs. Registration fees, gas, and maintenance charges will impact your budget. It will save you from any unwelcome surprises later on. Use the driving costs calculator available online to determine the exact cost of leasing a car in Canada.
Look for reliable car dealers
The type and model of the vehicle lay a significant impact on the vehicle leasing budget. Look for deals online. Explore different dealership websites to find the best deal. Alternatively, visit the car dealers available in and around your locality. Compare the vehicle models and their pricing.
Meet the dealer in person for assistance and detailed info about the deal. Make sure to take a test drive and check the complete history report of the vehicle to get an idea of its actual condition.
Negotiate the car lease offer
It is essential to research and know the deals available for leasing a car in Alberta. The more knowledge you have, the better you can negotiate. First, get an idea of what car models are available for lease in and around your area, and learn about the car’s worth, warranties, owner, colour, features, and other specifications. All these details can help you in negotiating the deal.
Figure out monthly lease payments
Calculate the lease charges you’ll have to bear every month. Several factors may impact your monthly leasing expense, such as initial charges, car’s value, lease term length, taxes (as applicable in your area), interest rate, etc. It is advised to take recommendations from your dealer and figure out the monthly lease payments considering all the listed factors.
Sign the lease agreement
After you are done testing the car’s performance, inspections, and calculations, the next and final step is closing the deal by signing the lease agreement. Before finalizing the deal, ensure the agreement for leasing a car in Canada is prepared per your province’s rules and regulations. You’ll need to provide registration information, including proof of purchase and number plates.
Benefits of car leasing
There are several benefits of leasing a car over buying one:
- You are not responsible for selling the car after driving it. It will go back to the leasing company.
- Comparatively low cost of monthly lease payments.
- Leasing cost already includes miscellaneous vehicle charges like administrative fees, freight, etc.
- You can lease different cars every time you renew your leasing agreement.
Things you need to be careful of while leasing a car
Here are a few things you need to keep in mind while leasing a car in Canada.
Leasing agencies need a guarantee that the individual will abide by all the rules and regulations mentioned in the agreement. This is why car lease agreements have harsh financing penalty rules.
No flexibility to change the financing agreement
Once the car leasing agreement begins, it is impossible to make any changes. Often, individuals are compelled to change the term duration, payment frequency, the monthly amount payable, etc., due to one or another reason. But unfortunately, there is no option of no option making adjustments to the lease agreements once it begins. Hence, take your time with the deal. Read the terms and conditions carefully before signing.
Penalty on ending the car lease tenure early
You will likely face harsh penalties if you decide to end the lease before its term. Depending on the terms and conditions mentioned in the agreement signed with the leasing company, you may have to pay the early termination charges and the remaining lease payment.
Fortunately, there is an alternative to it. Individuals trying to get out of the leasing agreement early may transfer the lease to their family member or a friend willing to take over the leased vehicle. The next best option is to buy the leased car and sell it to recover the amount.
Leasing a car comes with some challenges but offers many advantages to the lessee, such as comparatively low monthly payments. There are high chances of loan approval for a car with a depreciated value. Besides, leasing is a perfect option for people with low credit scores.
However, used car leasing also has some downsides. Leasing doesn’t add to asset building as you borrow the vehicle for a limited period. Also, a penalty is applied if you ride the vehicle beyond the kilometre limit mentioned in the agreement. Hence, you may get limited deal options. And car leases aren’t a common thing in Canada.
Defining your preferences and budget is essential to get the best out of car leasing. Conduct proper research, understand the charges associated with leasing, and take advice from the people who can guide you through the process.