Is it better to lease or buy a new vehicle?

Is it better to lease or buy a car?

This is a common dilemma and for many people, it can be unclear which option is better.

Leasing is really a form of automobile financing, and therefore the real comparison is between leasing and taking out a car loan to buy the vehicle. The lease payments are generally lower than the car loan payments, because a lease only finances the use of the vehicle for a few years, rather than the purchase of the entire vehicle. Some people prefer to lease because you can get a more expensive car for lower monthly payments.

However, this ignores the “payment-free” period you benefit from when buying after you pay off the car loan. If you crunch the numbers, purchasing and holding the vehicle for a longer period of time is almost always less expensive than leasing in the long run.

The benefit of leasing is that most people lease a new vehicle every two or three years, and therefore have no major repair risks, and also enjoy the pleasures of a new car more often. The tax rules for deducting the use of a vehicle are complex, whether leased or purchased. However, Canada Revenue Agency (CRA) attempts to structure the tax rules so that the tax savings will be similar whether you lease or buy a vehicle.

Overall drivers looking for a less expensive option will come out ahead in the long run if they purchase. However, some people are willing to pay more to change their vehicle every two or three years, and this is easier to do with a lease.

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