To Lease or Not to Lease a Vehicle?

To lease or not to lease a vehicle? That is the question. Unfortunately, there isn’t one clear answer! Everyone has different vehicle preferences and needs – and there are pros and cons to both leasing and buying. You’ll want to ask yourself if it’s important to have a new vehicle every few years, or if you’d rather have something you fully own.

There’s a lot to consider and we’re here to help you along the way. In this blog, we’ll walk you through the advantages of leasing a vehicle, answer all your questions about leasing new or used and tell you why leasing with bad credit could be worth it. Let’s get started!

HOW DOES IT WORK TO LEASE A CAR?

Leasing a car involves an agreement with a leasing company which allows you to drive a vehicle for a fixed monthly fee up until a fixed amount of kilometres. In most agreements, you can drive more than the agreed number of kilometres, but you will likely face additional charges when your lease ends.

The big difference between leasing and financing is that the monthly payments for a lease do not contribute to building equity.

A lease buyout means purchasing your leased vehicle before (or at the end of) your leasing period. This transaction is based on the residual value of the vehicle. In a nutshell, you are buying it out for what it is expected to be worth at the end of the lease.

5 ADVANTAGES OF LEASING A VEHICLE

Most people will tell you buying a car outright is the better financial decision because it means you’re working towards something you’ll own entirely versus paying to drive a vehicle for a temporary period.

On the flip side, leasing can sometimes be a more affordable option with less commitment. Everyone’s needs and budgets are different, so let’s look at some advantages of leasing a car in Manitoba.

1. Lower Monthly Payments. When you lease a vehicle, you’re only paying for the vehicle’s depreciation (or decrease in value) over your lease term, plus interest. Your payments will likely be 30 to 60 percent lower than standard car payments, which could give you the opportunity to drive a higher-quality vehicle for less. The downside is you won’t own it at the end of the term. Some lenders will resell leased vehicles as used vehicles once lease terms are up, which is another reason why they may offer lower monthly payments.

2. Lower Repair Costs. Typically, your lease will cover the manufacturer’s general warranty – meaning you shouldn’t be stuck with any major repair costs. Things like oil changes won’t be covered, but necessary repairs and maintenance will be.

3. Drive More For Less. The beauty of leasing is you get to drive a vehicle for a shorter period of time, then you can switch it up! If you’re someone who enjoys trying different vehicles, this is an excellent option. With a lease, you can upgrade your car to a better model every two to three years without having to worry about trading in or selling your vehicle.

4. Tax Benefits. If you select a car for lease and use it for business, you should be able to write off the lease payments as a tax deduction. If you need cars for a larger staff, leasing could help you get the most bang for your buck and save your business the most money over time.

5. Gap Coverage. Usually, all leases come with Gap insurance (also known as guaranteed auto protection). This insurance protects you in case the car is stolen or is extremely damaged and the repairs would cost more than the vehicle’s depreciated value.

BENEFITS OF LEASING NEW

Less Costs. Leasing new allows you to drive a brand-new vehicle without the costs it would take to own it.

New Vehicle Options. Dealerships are more likely to lease new vehicles rather than used ones.

Lower Interest Rates. Dealers may offer lower rates to entice customers. While interest rates will vary depending on make, model and year, dealers often try to keep the rates low to resell the vehicle later.

Flexibility. Most lease terms last five years maximum. If you’re planning on changing cars frequently, this is the best financial option.

Factory Warranty. Not only will you not have to deal with trade-in costs, but your lease will always be covered by a factory warranty.

BENEFITS OF LEASING USED

More Affordable. ​​Many people opt for a used vehicle instead of buying brand-new because used cars are more affordable.

Same Features For Less. If you lease a certified pre-owned vehicle, you can still get a car loaded with excellent features for an affordable price.

Flexibility. Used cars offer the same flexibility as a new car lease at a fraction of the cost, making them an appealing option if your goal is affordability.

Low Monthly Payments. Most used cars for lease are less than five years old and since they’ve already started depreciating, your monthly payments will be fairly low.

Tip: One thing to look out for is that used leased vehicles may not have the same warranty as new leases. Make sure to ask the dealer if you’ll have to pay for an extended warranty.

CONSIDER YOUR COMMUTE

Car leasing is a good option if you don’t have a long commute. People who don’t drive a lot have nothing to worry about in terms of exceeding the allotted number of kilometres that the lease agreement allows.

However, buying a car (used or new) is a good option if you spend lots of time behind the wheel. Owning a car means you don’t have to worry about kilometre limits – you can drive as long and far as you like!

LEASING A VEHICLE WITH BAD CREDIT – IS IT WORTH IT?

In Canada, there is actually no minimum credit score needed to lease a vehicle. This means you can technically lease a car with bad credit – and this is something we can help you with at Birchwood Credit.

However, a weak credit score will impact your ability to get a lease at an excellent rate – and sometimes it’ll even affect your ability to get approved. Some dealers may not approve a bad credit lease.

One of the ways to get approved for a lease with bad credit is if you have a co-signer. Your co-signer must have good or excellent credit and be able to take over your lease payments if you are no longer able to make them.

If you have less-than-perfect credit, a lease could be a great way to rebuild your credit. You will just need to ensure you’re making your payments on time.

LEASE YOUR NEXT VEHICLE

Are you looking to lease a car here in Manitoba? Our team at Birchwood Credit specializes in car loans and leases – and we approve all credit types! We can help you find a new or used car lease that fits your budget. Plus, we’ll help you rebuild your credit over time. Ready to get started? Contact our team today to learn more!