Along with ridesharing apps and e-scooters, car leasing seems to be growing in popularity these days. And not just in Toronto! Across southern Ontario, from Windsor, London, and Hamilton to Oshawa, Kingston, and even Ottawa, the popularity of car leasing is surging, and for good reason!
But what exactly are the benefits of a car lease? Well, to name a few, a lease:
- is often acquired with no down payment (more on this below).
- is usually cheaper compared to a monthly loan payment.
- is ideal for drivers who like to upgrade their vehicles often.
- is a great choice for drivers who only want a short-term commitment.
- is a good idea for drivers who like luxury cars (BMW, Audi, Mercedes, etc) without the extravagant price tag.
How does leasing a car work in Toronto?
The main difference between leasing and financing agreements is ownership.
Leasing is basically the same as renting. You don’t own the car, but you usually have the option to buy it at the end of the term.
On the other hand, with finance agreements, every payment you make goes toward owning the car, and when the loan is paid off, you have 100% equity.
Leasing a car almost always means you’ll have lower monthly payments than you will with a car loan. You’ll also pay less over the full term of your lease than you would over the same term of a car loan.
Why are lease payments cheaper than loans?
When you finance the purchase of a vehicle with a car loan, you’re committing yourself to repay the full value of the car (plus interest) over the term of the loan, typically 5 years. But when you lease a vehicle, you’re only committing to repaying for a portion of the car’s value depreciation over that same period of time.
However, with a leased car, annual kilometre restrictions, early termination stipulations, and accumulative wear & tear charges should be taken into consideration if you're trying to decide what type of finance is right for you.
Is it possible to get a short-term lease in Toronto?
A short-term car lease is typically a minimum of two years. One-year leases are available but they’re rare. If you do find a dealership offering a one-year lease agreement, you’ll find that your monthly payment will be very high due to depreciation. However, you might be able to lease a used car and bypass high depreciation costs. Alternatives to one-year vehicle leases include long-term rentals and a lease takeover.
Can I get a zero down lease?
Just like financing a new car with no down payment, zero down lease deals do exist. Although carmakers usually advertise leases with a suggested down payment amount, those same vehicles are often available as a 0 down payment lease.
With all leases, you’re making payments on the difference between the purchase price and a predetermined residual value. At the end of your term, you have the option to buy out your lease for the residual value or turn it in.
You see, if a car advert says you need to put $3,000 down on a lease but you choose a zero down lease instead, it does not mean you saved $3,000. The amount of money you avoided as a down payment is financed instead.
Regardless if you make a down payment or not, the total amount you’re making payments on remains the same. Essentially, you finance it instead of paying it upfront.
Can I lease a car with bad credit?
Whether you live in the bustling downtown area of Toronto or nearby in Kitchener, Hamilton, Niagara Falls, Peterborough, or even Kingston, there are plenty of dealerships that can help you secure a car lease. But what if you have bad credit?
Leasing a car with bad credit can be difficult, but not impossible. You may need to jump through a few extra hoops but even if you have a low credit score you can still secure a car lease. It can also be more affordable than a car loan under the same circumstances.
If you’ve found yourself in a situation with bad credit, you’re not alone. In fact, the average credit score among Canadians is around 600, which falls squarely in the middle of the “fair credit” range (560 to 659). That means everything from applying for a mortgage to getting another credit card becomes a lot more difficult.
The good news? There’s no minimum credit score needed to lease a vehicle in Ontario. Yes, you can lease a car with bad credit. But the lower your credit rating the more difficult it can be to find a dealer that will approve you. You may need to take some extra steps along the way, such as securing a co-signer or offering a larger down payment.
If bad credit is making it difficult to get approved for a lease, why not get pre-approved for an affordable car loan instead?
Wherever you live in Ontario, Canada Drives can get you pre-approved for a car loan online in minutes. By getting pre-approved for a car loan you can shop with confidence knowing exactly what you can afford.
