Should you buy or lease your next car

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Should you buy or lease your new car?

With so many car dealerships offering 0% financing on new vehicle purchases, and low rate leases, it can be hard to decide whether you should buy or lease your next car. Both options have their share of pros and cons. Your lifestyle and daily commute might just be the best way to determine which option is best for you. For instance, do you need a new car to get you to work? Need something new for your business? Are you finding yourself transporting kids back and forth from school and extracurricular activities?

While bank loans are at an all-time low, taking on debt isn't for everyone. And although leasing offers flexibility and the option to upgrade vehicles every few years, it also requires a steady cash flow and the willingness to commit to making regular monthly payments. So the choice of buying versus leasing, or vice versa, comes down to a combination of what you can spend and when you can afford to spend it.

The Advantages of Buying

Many consumers would argue that, due to today's low interest rates, now is the best time to borrow money for a big purchase item, such as a new car. 0% financing and significantly lower bank interest rates than we've experienced in recent years have made the prospect of owning a car much more realistic and appealing. And with a low interest rate, you could end up owning your car sooner than if you decided to choose a lease-to-buy option.

But how long do you plan to drive this new car and how disciplined are you when it comes to handling wear and tear and general automobile maintenance? Also, how much will your car be worth once you're done paying for it and how much over the sticker price will you have paid in interest payments? Will you have access to additional resources for handling unexpected but necessary emergency repairs such as replacing your brakes or alternator?

The Advantages of Leasing

Leasing can be an ideal way to go if you have a steady monthly cash flow and prefer to avoid the added responsibility of owning your car. You'll pay a fixed amount every month, for the duration of your lease, and will either have the option of buying the vehicle once your lease is up or of trading it in for an upgrade.

However, unlike buying, leasing obliges you to make constant monthly payments until the end of your lease. In addition, you're limited to a certain number of kilometres per year (for example, 24,000 KM/year on a 3-year lease) and are responsible for any overage.  You'll also be liable for any damages that are not considered to fall under general care and maintenance.

Do the Math

So when it comes to buying versus leasing a new car, the variables are many. Either option might suit your needs, depending on how you maintain your budget, cash flow and vehicle, and depending on the amount of driving you do per year. If you're fastidious about car maintenance and repaying your loan on time or early, then buying might be for you. But if you prefer a hassle-free driving experience and the option of changing and upgrading vehicles every three to four years, then leasing might be more up your alley.

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Need help?

Take a look at the top 5 FAQs:

  • What are my choices in terms of auto coverage?

    What are my choices in terms of auto coverage?

    If you own or drive a vehicle in Canada, you must be insured. Different provinces have different requirements, but the four mandatory elements of auto insurance are:

    1. Liability - if you cause an accident and someone sues you
    2. Accident benefits - if you or someone in your vehicle is hurt in an accident
    3. Direct compensation – property damage (Ontario only)- if your vehicle gets damaged (and it's determined you're not at-fault or only partly at-fault)
    4. Uninsured motorist - if you're in an accident with an uninsured or hit-and-run driver
  • How do I reduce my insurance costs?

    How do I reduce my insurance costs?

    There are several things you can do to reduce your insurance premium costs:

    1. Work on your driving record
      Here's an easy, yet effective way to bring down your insurance costs: build a consistent accident and conviction-free track record with an insurance company.
    2. Choose your automobile wisely
      Do your research before you invest in a new car. Read consumer reports, and check with your insurance company to find out which cars tend to be targets for theft and vandalism. Remember, if you buy a car with a high theft rate, your premium will be higher.
    3. Adjust how you use your car
      By adjusting the way you use your vehicle, you can also bring down the cost of your insurance rates. If you live in a metropolitan area:
      • can you take the subway, train or bus to work?
      • has your job changed, or have you moved recently?
      • do you use your automobile to drive a short distance to work?
      • does your vehicle get used for low annual kilometers?
        If you answered yes to any of these questions, you may be entitled to lower insurance costs. Another consideration is whether you let others use your car. It is sometimes possible to exclude certain high-risk drivers from your policy so that good drivers are not penalized with a higher premium.
    4. Choose a higher deductible
      If you choose a higher deductible up front, your premiums will be lower.
    5. Review your coverage
      Take a closer look at your coverage to make sure you're not paying for things you don't need.
  • How can I earn PC® points?

    How can I earn PC® points?

    When you use your President's Choice Financial® MasterCard® to pay your PC auto insurance premium, you'll get 20 PC points per dollar of your premium. If you use your President's Choice Financial bank card to pay your PC auto insurance premium, you'll get 10 PC points per dollar of your premium.

  • Are other drivers insured to drive my car?

    Are other drivers insured to drive my car?

    Yes, as long as he/she has your permission to drive the vehicle, has a valid driver's licence and has not been specifically excluded from driving the vehicle. However, all licensed drivers in your household must be listed on your policy—regardless of how often they use your vehicle.

  • What is a deductible?

    What is a deductible?

    A deductible is the amount that you agree to pay towards the repair or replacement of your vehicle before your insurance pays the rest. You choose your deductible amount when you purchase your auto insurance. The higher your deductible, the lower your premium.

See all Auto Insurance FAQs

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