Guide to Car Leasing in Canada

Do you want to enjoy driving the car of your dreams, but you just don’t have enough money to buy one? You can do that easily by leasing a car. Read on to find out how you can do that.

There are also other financing methods to help you get around with your dream car without financial strains. If you are not yet ready to purchase a car, you can always lease one. Leasing a car involves borrowing the vehicle of your choice for a short term while paying less monthly payments than financing a car loan. Researching well first and focusing on fine print helps you to spend less in the long run. 

If you decide to lease a vehicle, this guide will give you all the information you need, including the pros and cons of leasing a car. You will also learn how to save money by picking the best leasing option in the market.

What is a Car Lease?

When you plan to lease a car, you will be able to drive a new car for a pre-agreed period at a fixed monthly payment. To lease a vehicle, you don’t need to get pre-approved or pay a huge down payment. The payments made every month goes into maintenance and use of the vehicle rather than financing to own the vehicle. 

Leasing a vehicle is just like renting a vehicle for a long period. Leasing a car takes between 2 to 4 years, and once this period is over, the client can decide to take the vehicle to the leasing company or buy it. The price of the car is set at market value if you decide to buy it. If you aspire to lease a car, you will have to pay a down payment, and other payments will be made every month until the leasing period ends. The monthly payments consist of taxes, rental charges, depreciation costs, and interest. 

 

Benefits of Leasing a car

A car lease has several benefits; one of them is the payment cost is lowered. That’s because you only need to pay the car’s depreciation cost. If you find commitments strenuous, then you need to go with the car leasing option. It is also a great selection for someone having a hard time choosing a particular car model or interior. 

When the agreed leasing period ends, the customer may decide to trade in the car for another superior model, a different make, or a different color. You will have a shot at a fresh warranty every once the leasing period is over. You will also remain updated with the latest models and particular brand car features—free services such as servicing and oil change. 

If you take good care of the car to prevent wear and tear and stay within the mileage cap outlined in your contract, you can avoid extra fees. It doesn’t matter which car you have chosen.

Leasing a vehicle is just like renting a vehicle for a long period. Leasing a car takes between 2 to 4 years, and once this period is over, the client can decide to take the vehicle to the leasing company or buy it. The price of the car is set at market value if you decide to buy it. If you aspire to lease a car, you will have to pay a down payment, and other payments will be made every month until the leasing period ends. The monthly payments consist of taxes, rental charges, depreciation costs, and interest. 

Drawbacks of Leasing a Car

While you are looking at the pros of leasing a vehicle, it is also a good idea to explore the cons that come with it. One of the obvious cons of leasing a car is that, as much as you will be making monthly payments, the fact remains that you are not the owner. If you want to enjoy driving the vehicle again, you will be forced to start the leasing process once again when the deal comes to an end. 

You may want to go for a vehicle with a lower price tag. However, this may cost you in the long run. There is also the temptation of wanting to upgrade your vehicle every time the leasing term ends. This may cause you to go bankrupt because an upgrade means the monthly payments will increase. 

When trying to a car lease, you need to carefully go through and scrutinize the contract. With each car lease contract comes restrictive guidelines. Failure to adhere to the set guidelines may cause you penalty fees. These guidelines may include a mileage cap that restricts the driver to an annual kilometer limit (25,000 km/ year). You need to stay below this mileage cap to avoid expensive penalty fees. This means that you should avoid long road trips or long commutes to work. 

Dings, considerable wear to the car’s interior, drive performance, and damages may lead to hefty fee penalties. If you consider terminating the lease agreement prematurely or before the term ends, just know that you will be forced to pay for the remaining balance of the lease term. Additional charges are always there in the contract. The problem is that they are hardly discussed. That is why it is always good to go through the lease agreement or contract cautiously to avoid penalties.

When the agreed leasing period ends, the customer may decide to trade in the car for another superior model, a different make, or a different color. You will have a shot at a fresh warranty every once the leasing period is over. You will also remain updated with the latest models and particular brand car features—free services such as servicing and oil change. 

If you take good care of the car to prevent wear and tear and stay within the mileage cap outlined in your contract, you can avoid extra fees. It doesn’t matter which car you have chosen.

Leasing a vehicle is just like renting a vehicle for a long period. Leasing a car takes between 2 to 4 years, and once this period is over, the client can decide to take the vehicle to the leasing company or buy it. The price of the car is set at market value if you decide to buy it. If you aspire to lease a car, you will have to pay a down payment, and other payments will be made every month until the leasing period ends. The monthly payments consist of taxes, rental charges, depreciation costs, and interest. 

What Options are Available for Car Leasing

In Canada, you can access several vehicle leasing options. These options vary depending on your personal preference. 

Standard Rental Leases 

This type of car lease gives the customer a chance to lease a new car, but your credit profile needs approval first. You will need to make a down payment of a small amount. For the remaining period of the car lease term, you will need to make monthly payments. The car needs to be taken back to the dealership once the lease term ends. You may decide to get a newer car or choose to redeem the lease.

Leasing to Own 

Leasing to own allows the customer to buy the vehicle once the leasing term comes to an end. This type of car lease demands regular payments. Typically, the payments are either made weekly or bi-weekly. This allows the buyer to accumulate equity that will allow buying of the vehicle. Smaller dealerships are the ones that often offer this type of vehicle lease to cater to the customers who have bad credit. During the approval process, credit checks are never done.

To get such a lease, you need to provide proof of identity, income, and sometimes insurance. You also need to show proof of residence. Although the approval process may be lenient, don’t expect to have the luxury of choosing brand new vehicles as offered by the standard car lease agreement. 

Lease Takeovers

Another leasing option that offers an opportunity to get a good deal is a lease takeover. This type of lease involves taking over someone else’s car lease. When you choose this option, you will incur lower fees because the upstart costs are usually lower. Another thing that makes this type of car lease great is a cash incentive offered for taking over someone’s car lease. 

This doesn’t mean that a lease takeover is all rosy. One of the drawbacks of taking over a lease from someone else is that you may inherit bad vehicle conditions and mileage overages. When the lease ends, you may be surprised by fees and penalties. That is why it is always a good idea to check the lease term first before taking over.

Leasing a Used Car

You can lease a used car which is also another great option if you plan to buy that vehicle. Another instance that may cause you to lease a used car is when a customer terminates the lease agreement prematurely. If you decide to take over this kind of lease, you need to carefully examine or inspect the car for damages, kilometer overage or wear. Remember, you will be responsible for any damages incurred. You may opt to lease a used car because it seems cheaper, but don’t forget that you might end up paying hefty penalties and maintenance fees once the lease comes to an end. 

The Steps to Leasing a Car

You can avoid the high cost of buying a brand new vehicle by leasing a car. Car leasing is also a great option for those wishing to drive high-end vehicles without incurring expensive costs. If you are among them and wondering how to lease a vehicle, here are the steps involved in car leasing. 

Check Your Credit Score

If you want to qualify for a car lease, then you need to have good credit. An above-average credit score will earn you a car loan approval. A credit score of 660 and over is regarded as good by Equifax. If your credit score is nowhere near this one, you should not give up. You can freely check your credit score online and do several things to improve it.

Have a Budget

Many people consider car leasing more than financing because of low monthly payments. However, before getting a car lease, you also need to factor in fuel, insurance, potential down payment, maintenance, among other costs. Take your time crunch some numbers to ensure that you settle for only what you can afford without straining yourself financially. 

Find the Right Car

Once you have come up with an apt budget, the next step is to find the right vehicle that meets your demands. If you need a big, spacious car that accommodates every member of your household, then settle for an SUV. You may also opt for a luxurious vehicle if you want it for your business. The internet is there to help you find the right car. 

Look for a Reliable Dealership

Now that you’ve found the right car that meets your needs, finding a reliable dealership is next. If you can think of the right dealership near you, you can search online to find one. Confirm whether they are reliable by reading reviews.

Inquire for a Test Drive

The best way to know whether the car you have chosen meets your require to take it for a test drive. You are required to make sure that you are comfortable with your leased vehicle since you are paying for it. 

Make a Down Payment

Not all dealerships will require down payments to lease a car. However, paying down payments may be helpful if you want to increase your chances of getting approved. It also helps you to lower monthly payments. 

Review Your Lease Agreement

You’ve picked your car and got financing. Now, the next step requires attention. Before signing the lease agreement or contract, you need to go through it with a sober mind. Ensure that you checked the details carefully and understood everything. Pay close attention to things like down payment, monthly payment, which kind of maintenance you are responsible for, other fees, and term length. Discuss with your dealer if you need to change anything. 

Begin Making Payments

Now that you have the car keys in your hands, it’s now time to enjoy driving your leased vehicle. As you do that, don’t forget to make full payments every month as it will help you increase your credit score.

Remember to Perform Routine Maintenance

You need to take good care of your leased car by performing regular maintenance, checking oil, and driving it carefully to avoid accidental damages. You might end up paying an immense amount at the end of the lease term for negligence. 

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