Why 70% of Canadians Lease Instead of Financing New Cars?

Car leasing has been around for a long time. More than 60 years, in fact. Why are there so many ads out there that show Lease prices first over Financing? Pretty easy, if you ask the dealerships, you will be surprised to know that between 60% and 80% of Canadians Lease their New Cars, instead of Financing these. Why? Well, there are multiple reasons:

"Transportation Needs" are More Variable in Canada

When you live in a "weather predictable" part of the world, it is easier to project how your transportation needs will be for the next few years. Canada has all four seasons and very extreme. Although summer may not be as intense as other parts of the world, it reaches the 38 degrees Celcius sometimes during July-August.

If you live in a city, you will likely be OK with a small car, but then, during winter you'll have some trouble with it. But still, when you are young, you can handle it. You don't mind to shovel every week during the winter and dig out your car from the snow once a while. Later, there are high chances your family size grows: more space is needed, more stuff to put in, more room required and you may want to go to the suburbs, but not that "right away." Maybe you wait some time, while kids are young and you can move them all around in a mid-size vehicle or crossover, but you will "like way less" to shovel during winter.

I make all this intro as, while in many places, your transportation needs may be more strictly attached to your family needs, in Canada there will be more factors like where you live and how you expect to deal with the variable weather than other places in the world.

Leasing will be a way more flexible way to adapt to these situations during your life, compared to an actual vehicle purchase. Even for doing a Lease Transfer and getting shorter-term contracts with a lower price than financing longer with higher, will be a better alternative.

Vehicle Depreciation Affects the Vehicle Owner

And if you actually own the vehicle, you will be the affected. This is why "car leasing" is more convenient. Just think of the following example:

Imagine a car that never breaks. A car that doesn't rust and can roll for hundreds of thousands of kilometers without any problem.

That car would be worth a lot, for sure. But it doesn't exist yet. Even the most robust and reliable vehicles on the planet can't last long, even in the hands of a mechanic who can replace and fix every single detail. Cars always will lose value, no matter what.

And then, if we also see it from the Canadian perspective, we have salt, snow, ice, rocks and extreme cold conditions, plus summer. It all affects the vehicle status in our vast northern country. Just don't be the owner of something that rusts, breaks and loses value.

Risks are Covered

If you plan your budget and go for a projected solution, you won't have to deal again with the surprise that risks may show up shortly. Having a car and hitting the road has tons of risks. Leaving apart the ones related to the security, the vehicle itself has a lot of chances of breaking on a bump, a hard break or any other mechanical inconvenience.

This is why manufacturers offer flexible warranty periods where they will cover every single mechanical and non-wearable problem of your vehicle. With used cars or financed ones for longer terms, you are entirely on your own when these issues show up.

When you lease a vehicle, you plan to do it regularly and within your budget for 3 - 5 years, depending on many things, but mostly on warranty coverage and costs. If it is cheaper for you to lease the vehicle for a longer term, but you will still be covered, why not to do so? Then after that, you rent again, and again. 

Plus Many Other...

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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 him at Leantrepreneurship.com.

Jorge is also the author of Car Leasing Done Right: A Canadian Guide for Understanding & Optimizing Vehicle Leasing Costs, released on Nov. 5th, 2021. It is available at Amazon.ca