Should I lease a car?

Leasing continues to be a popular option for many young drivers. If you’re on the fence, start by considering whether the flexibility outweighs its overall high cost.

6 reasons why you may want to lease a car

If you like the sound of these six features, leasing may be for you:

1. Flexibility

A lease is going to give you the most flexibility with the least hassle. You can change the type and size of your car as your needs change. And the more you lease, the more you save.

Love a manufacturer? You may be able to score a loyalty bonus. Want to change brands? Competitors often offer a conquest bonus to people who switch from a qualified lease. You might not get the same kinds of discounts when you buy.

2. Newest technology

Vehicle technology is updated each model year. Leasing lets you take advantage of changes in infotainment systems, safety regulations and design.

Think about the rise of bluetooth and Wi-Fi hotspots. Only luxury trims had them in the beginning, but now every car comes equipped.

If you want to be part of the next trend, a lease gives you the opportunity — without needing to buy the most tricked-out trim available.

3. Lower monthly payment

It’s no secret that leases are cheaper in the short term. Because you’re only paying for a portion of the car’s ownership and depreciation, you’ll pay less than if you’d financed. This is especially true for luxury cars. The high price point combined with high depreciation make leasing a much more appealing option for drivers seeking an expensive ride.

But don’t forget — leasing will always cost more money in the long run. You should compare the costs between leasing and buying to see which option makes more sense for your preferences and lifestyle.

4. Tax deductions

If you own a business that involves a lot of driving, leasing may be a good option. The CRA allows you to deduct a portion of your monthly lease payments. But the tax deductions are best for luxury brands, so choose the car you work with wisely.

5. Less maintenance

Many manufacturers offer discounted or free maintenance programs, saving you hundreds of dollars over the life of your lease. Maintenance and repairs are a major competent of the cost to owning a car. If your lease includes free maintenance, you could end up saving a lot of money.

Even if yours doesn’t, you’ll still save. Cars require more maintenance and repairs as they age. If you’re switching things up every few years, you won’t have to keep up with rising maintenance costs.

6. Warranty and maintenance coverage

Because a lease will only last two to four years, your car will be covered under the manufacturer’s bumper-to-bumper warranty. This means you won’t be on the hook for any mechanical problems that crop up. Even better, you won’t need to worry about things like extended warranties.

Why leasing may not be the best idea

Leasing is a great choice for some — but it has its fair share of downsides, too:

• More expensive than ever. Leasing a car doesn’t save the same kind of money it used to. Rising costs and lower residual values mean you may be paying more each month — with nothing to show at the end.
• Good credit required. You may not be paying interest on a loan, but you’ll still need good credit to get a low money factor rate.
• Caps on the number of kilometres. Leases have certain caps per year, such as 16,000, 20,000 or 24,000 km.
• Excessive fees. Between the disposition fee and high down payment, you’ll have to hurdle some major upfront costs — not to mention lease-end fees at the end of your contract.
• Penalties for breaking contract. If you need out of your lease, prepare to pay a large penalty fee. Some companies will allow you to swap leases with someone else, but if not, you could be stuck with your contract if you can’t afford to break it.

Bottom line

If the rising costs and other drawbacks don’t deter you, learn more about car leasing to find out how you can make your next lease as painless as possible. Decide to buy instead? Compare your car loan options to find the best rate available to you.

Frequently asked questions

• How can I get the best deal on my lease?

  Knowing how a car's value will hold up is the easiest way to get a good deal. Over a 3-year period, the value of a vehicle tends to go down by 40-50%. The better your car holds its value, the lower your lease payments will likely be. Online resources like the Canadian Black Book and ALG publish annual lists of car models that keep the most value. According to the J.D. Power 2024 U.S. ALG Residual Value Awards, some of the vehicles available in Canada that retain the most value over a three-year period are:

  • Honda (Civic, Accord, CR-V and Passport)
  • Toyota (GR Supra, Tundra, Tacoma and Sienna)
  • Lexus (IS, NX, LX and RX)

• When should I buy my leased car?

  If you've fallen in love, have a potential buyer lined up or can negotiate a lower buyout price, you might want to buy your leased car. Even if you don't want to keep it, you can always sell it for a down payment on another car.

To make sure you get accurate and helpful information, this guide has been edited by Leanne Escobal as part of our fact-checking process.

Written by

Kellye Guinan

Writer

Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University. See full bio

Kellye's expertise

Kellye has written 25 Finder guides across topics including:

• Personal, business, student and car loans
• Credit scores
• Car financing
• Debt consolidation