Leasing is Better Than Financing, Unless You Drive More than 385Km/week

And I don't mean it is the "unique" way, but definitely is the only significant practical variable that would make me suggest someone finance a vehicle. Yes, Leasing is the best way to go on 90% of cases, except when the annual km you make will be way more than the average offered by manufacturers. On the following article I'll try to explain why:

Most Manufacturers Offer Standard 20,000Km/year

This is the default (or average) car leasing km allowance in Canada. In the U.S. it is measured in miles, but it is kind of similar keeping the same proportion:

  • 12,000Km/year or 230Km/week (Lowest Kilometrage). often offered by Audi, Mercedes-Benz, BMW and some other luxury brands.
  • 16,000Km/year or 307Km/week (Ultra Low Kilometrage) 
  • 18,000Km/year or 346Km/week (Low Kilometrage) 
  • 20,000Km/year or 385Km/week (Standard Kilometrage)
  • 24,000Km/year or 461Km/week (Extended Kilometrage) 

Also, remember that "km usage" stacks from one year to the next one, so, essentially, if your lease is for four years and 20,000km/year, it means that you are expected to return the vehicle with 80,000Km in total. 

Always do the Math of the Additional Kms

Even if you expect to do more than those numbers, evaluate how much more you plan. The average costs are between 8 to 20 cents per additional kilometer, depending on the brand. Luxury vehicles, of course, tend to protect more the number of additional kilometers as they expect a high resale value on the car on the sale after it is returned.

Just consider the following scenario:

Instead of making 80,000Km in the whole term (for a four years lease), you return the car with 85,000. This means that you made an extra 5,000 or 1,250/year additional kilometers. If we do the math, 1,250 per year X 0,08 cents = 100CAD. It means you would end up paying 400CAD at the return of the vehicle when the lease is over. So here is the big question: on this specific case, would the 400CAD worth for you to go ahead with the lease?

In the previous example, if instead of reaching the 85k limit, we would have done 100k, then the additional kilometers charge would be four times bigger: 2,000CAD. 

You need to estimate, evaluate if it is really worth and then go ahead with one variant or the other one. Study your monthly/ weekly/yearly numbers on the odometer. It will be an estimate, but it is the proof you need to decide.

Consider Also the Lease Transfer

The fact that you are running out of kilometers, because something on your daily commute change, you change your job or simply because you made a mistake on the initial estimation, always evaluate doing a transfer. Maybe for you, your lease will overflow, but it doesn't mean that for other people it will. 

You can find more information about doing a Lease Transfer in the following articles:

About the author

Jorge Diaz is a passionate car lover, winter driver & Software Engineer. For the last 10 years, he has built Online Solutions used by more than 5,000 companies across the globe. He founded LeaseCosts in 2016 with the purpose of simplifying and helping Canadians to better understand the complex market of car leasing in Canada. You can connect with Jorge at Leantrepreneurship.com or send him a direct message.