By: Surjit Singh Flora
When it comes to purchasing a new car, leasing is undoubtedly the way to go. When considering purchasing a pre-owned vehicle, it may be wise to opt for financing.
Because leasing a car reduces your monthly payment, Paying only for the portion of the vehicle you use results in a lower monthly payment. Lower transportation costs mean more money for saving, investing, or entertainment. You’ll have extra money; it’s up to you what to do with it.
Also, your car will always be under warranty. Most vehicles on the market come with a three-year warranty, which covers the entire duration of a typical three-year lease. No unexpected costs for mechanical failures during your lease Covered!
Before buying a vehicle, it’s important to know the two main financing options: leasing and financing. Leasing is becoming more popular in the automotive industry, particularly for EV adoption, as it is seen as a growth accelerator.
Canada’s electric vehicle adoption rate increased from 5.9% to 9.4% in 2022, while the rate for 2021 rose from 4.4% to 6.5%.
With electric vehicles being the future of mobility, stakeholders are investing in new business and financing models. Stakeholders are promoting leasing options with lower monthly payments to make it easier and more affordable for people to drive and get into the cycle.
There are many reasons why leasing may be better than financing in certain situations. Reduce monthly payments. Lease rentals may seem more attractive as they are usually lower than EMIs. You pay for the portion of the vehicle’s value used during the lease term, not the entire value. Leasing is a more affordable option because you don’t pay back any principal.
Leasing can ease the financial burden of monthly payments and create job opportunities in the taxi industry. It helps the lessee manage monthly cash flow and reduce initial expenses.
Leasing a vehicle usually has lower upfront costs than financing. Usually, the security deposit and first month’s payment are lower for leasing compared to financing. In leasing, the residual value discount is applied on day 0, resulting in lower monthly lease payments. Financial advisors recommend making a large upfront payment when buying a new vehicle to lower monthly payments and principal amounts. Leasing a vehicle involves a low down payment and a fixed monthly payment.
Leases often include insurance, maintenance, and repair coverage, which covers battery replacement costs that can make up almost half of the vehicle’s total cost. It may save the lessee unexpected costs. Lease arrangements can save money on maintenance and repairs, as they usually cover most of the repairs.
The lessee doesn’t have to pay for insurance, maintenance, or repairs, unlike with financing. These expenses can accumulate over time. It reduces car-value stress and selling hassle.
Leasing offers the opportunity to drive a new car every few years. Drive the latest model at a lower monthly cost, appealing to those who like to keep up with technology and features. With loans, you’re not usually locked into the vehicle for the entire term and don’t have to enter new leasing terms with a different owner.
A lessee can buy the same vehicle they leased at a lower price than a new one if they enjoy driving it. Leasing gives the lessee the option to buy the vehicle at the end of the lease, giving flexibility to the lessee.
Canada’s government is interested in making EV leasing financially viable.
BEVs, FCEVs, and PHEVs with extended range can get up to $5,000 CAD in incentives. Quebec residents can receive up to $7,000 in financial aid for buying or leasing a 100% electric car or plug-in hybrid. B.C. offers up to an $8,000 refund for electric cars, and there are federal rebates available too, which could save you over $8,000.
On the other hand, Canada doesn’t have a tax credit for electric cars. Self-employed or work-related vehicle users may claim a deduction on their tax return for a portion of a new electric vehicle’s purchase price, leading to substantial savings.
The choice between leasing and financing depends on your needs and finances. Leasing is a good option for those who want to start with a lower down payment, while financing is better for those who want more control over customizations, mileage, and the vehicle itself. Many people who can’t afford a luxury car choose to lease one for the high-end experience. Consider your budget, driving habits, and long-term goals when making a decision.