April 4, 2024

Leasing or buying a car, which is more affordable

Leasing and buying are the two most common ways Canadians pay for cars. We look at the pros and cons of buying and leasing a car and examine which one is cheaper overall.

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Leasing or buying a car, which is more affordable

A woman admires the features of her new car

Cars are expensive; anyone who has one will tell you. With the current cost of living crisis, we’re all looking for ways to make smarter spending decisions, especially on large purchases. 

Leasing and buying are the two options available to Canadian consumers looking to get a car. Each comes with advantages and disadvantages and deciding which is right will depend on your own situation.

Current car costs in Canada

If you’re looking for a new car in Canada, be prepared for a shock at the price. A new car costs an average of $67,259 in the fourth quarter of 2023, according to AutoTrader’s Price Index Report. It showed Alberta was the most expensive province to buy a new car in, with a whopping average cost of $69,647.

What’s the cheapest area? That would be the Atlantic Maritime provinces, where an average of $62,186 is needed to buy a new car.

This doesn’t mean that you can’t get a car for less. This report considered trucks and higher-end models of cars, which skew the results upward. 

For example, a new Honda Civic in Canada is about half the cost of the average vehicle in Canada, coming in at $36,028. 

So, if you’re looking for a car, it really depends on what type of vehicle you’re looking for. Which is why it also matters to make the right decision for yourself when choosing between leasing and buying.

What do buying and leasing mean?

The main difference between leasing a car and agreeing to finance a car is that at the end of a finance agreement, you own the car. At that point, you own 100% of the vehicle and don’t have to make any more payments.

A lease agreement is more like a long-term rental, typically lasting two to four years. At the end of the agreement, you must return the car to the dealership. You can choose to buy the car when the lease agreement is over, if you wish.

Struggling to afford car payments?

The advantages of leasing

Costs less short-term:

People who lease cars usually have lower monthly payments than someone who is financing the same vehicle. To calculate monthly payments, the dealership estimates the value of the vehicle at the end of the lease term. This means a person who leases a car is only paying for the depreciation in value of the vehicle that occurs during the lease term, making the payments lower.


Leasing is advantageous to anyone who does not want to buy a car and wants the chance to have a new vehicle every few years. Another advantage is low maintenance costs. A car being leased for a few years will need very little maintenance compared to a car that is being financed over the course of many years, which is sure to need some repairs.  

The advantages of buying


The most obvious advantage to financing a car is that at the end of the agreement, you own the car and don’t need to make any more payments. Most financing agreements in Canada last seven years, but you can choose to make it shorter or longer. 

When buying a car, it’s best to save up as much money as possible as a down payment before purchasing. This will lower the amount you owe on the car and your monthly payments as well. If you put down a large deposit you can even complete your payments while the vehicle is still in the guarantee period, when it is still covered by the manufactures warranty.

Long-term savings

Once a car is paid off, you can take the money you were spending on it and begin growing your long-term savings. This can mean putting money aside for an emergency fund or using it to pay off other forms of debt, like credit cards.

Key differences

Now we know what buying and leasing mean, but what are the key differences? 


While a leased car has lower car payments overall, the interest charges can be higher than that of a financed car. It also costs more to continue to lease cars over and over than it does to finance and own a car. Most people choose not to buy the car when a lease agreement ends and instead get a new lease. Doing this over and over means a never-ending cycle of car payments. Buying a car is much cheaper than continuously leasing a car over and over.

Owning a car allows you to sell the vehicle, you can then put this money towards the purchase of a new car and reduce the amount you owe on the principal.

Driving restrictions

Lease agreements come with annual kilometre driving restrictions. This means you can only drive the car a certain number of kilometres each year. The dealership wants to be able to sell the car at the end of the lease for a certain price and driving over these limits can depreciate the value of the car faster. That’s why there are limits.

If you go over the limits, there are financial penalties.

Lease termination penalties

There are also financial penalties if you choose to get out of your lease early. Often, you are allowed to transfer a lease to a friend or family member, but this option means finding someone else who wants to pay for the remainder of the lease. 

Someone in the middle of a finance agreement can sell their car to a dealership and use the money to pay off the rest of their loan without penalty.

Which is better?

Overall, if you’re looking for a way to save money long-term and gain an asset, buying a car is better than leasing it. If you’re unsure if you can afford to keep up with monthly payments for years, then perhaps leasing is a better option for you. It really comes down to your own situation. 

What about carsharing?

A recent trend in many Canadian cities is the rise of carsharing services. Zipcar, Communauto and Enterprise CarShare are just some of the services that have popped up around the country. 

These services allow you to book and pick up cars that are located in designated parking spots. You have to pay a membership fee as well as an hourly fee for the time you use the car. There are often additional charges if you drive the car over a certain distance in one trip, usually about 20 cents per kilometre after 200 kilometres.

Cost compared to leasing and buying

It depends on how much you use a car, which will determine if carsharing is right for you. If you drive every day, then leasing or buying a car will be a better option for you.

But if you need a car only once or twice a week, or just a few times a month, carsharing is a much better alternative to buying or leasing a car. Cars are incredibly expensive to buy and maintain, and we haven’t even addressed the cost of insurance or gas.

Carshare services lower these costs significantly. The car industry won’t tell you this, but you should absolutely avoid buying a car if you can.

What to do if car debt is too much

If you have leased or bought a car and are struggling to make payments and perhaps fear it will be repossessed, speaking to a Licensed Insolvency Trustee is a great first step to take. A Licensed Insolvency Trustee can assess your situation and come up with a plan to reduce your debts. The first consultation can be done in under an hour and is free of charge.

Do you have more questions?

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April 4, 2024

Leasing or buying a car, which is more affordable

Leasing and buying are the two most common ways Canadians pay for cars. We look at the pros and cons of buying and leasing a car and examine which one is cheaper overall.

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