Buy or lease a car: how to choose

In short: is it better to buy or lease a car?

Should you buy or lease a car? The answer is case by case, not a universal rule. If you drive more than 25,000 km per year or tend to keep your vehicles for more than seven years, purchasing is a good option. If you switch vehicles every three or four years with moderate mileage, leasing makes sense.

The core difference comes down to one word: ownership. When you buy, you pay for the entire vehicle and you become the owner. When you lease, you pay only the portion of value the vehicle loses during the contract.

Four criteria settle the question: monthly budget, annual mileage, length of ownership and your driving habits. Keep them in mind for what follows.

Purchasing a car: how does it work?

You pay cash or finance the full price of the vehicle, usually over 60 to 96 months. Each payment reduces the balance and increases your share of ownership. At the end, the vehicle is yours and its resale value is entirely yours.

• Cash purchase: no interest, but a large one-time payment.
• Financing: payments are higher than if you were to lease the same vehicle.
• Term: the longer the term, the lower the payment and the higher the total interest.
• Resale value: it is yours, via trade-in or direct sale.

You become the owner of the vehicle

The vehicle is an asset in your name. You can sell it, trade it in or give it away whenever you want, without authorization or penalty.

You have no mileage limit

For a representative who drives 45,000 km per year, the decision is easy. On a lease, that mileage would mean thousands of dollars in fees at the end of term. Purchasing is the least expensive scenario.

You can keep your car for several years

After 72 months of financing, a well-maintained vehicle can run for another five or six years with no monthly payment. That is when buying catches up to and surpasses leasing.

You can resell or trade in the vehicle

The resale value belongs to you. On a vehicle that holds its value well, that asset can become the cash for the next purchase.

What are the drawbacks of buying a car?

The drawbacks of buying a car mainly affect cash flow and the vehicle's depreciation.

Payments can be higher

For the same vehicle and the same duration, the gap between financing and leasing is often 25 % or more, since you repay the full value when you buy.

You take on the vehicle's depreciation

A new vehicle loses a significant share of its value in the first few years. When you buy, that loss is yours.

Generally lower monthly payments

You finance only the portion of value used during the contract, not the entire vehicle.

The ability to change vehicles regularly

Once the leasing contract is done, you hand back the keys and leave with a recent model, with no selling process to manage.

A vehicle often covered by warranty during the lease

A 48-month term ends before the end of Volkswagen's basic warranty, set at 4 years or 80,000 km. Major repairs therefore remain covered.

More frequent access to new technologies

In three years, the Tiguan's centre display went from 8 to 15 inches and driver assist systems added a camera with 360-degree view. Renewing more often means keeping pace with the latest tech.

What are the drawbacks of leasing a car?

The drawbacks of leasing a car mostly show up at the end of the contract.

Mileage limits

Excess-kilometre charges often run around $0.12 to $0.20 per kilometre. Exceeding a contract by 15,000 km means a $1,800 to $3,000 bill.

Possible charges for excessive wear

Dents, a cracked windshield, tires below the legal limit: these items are inspected at return and billed if they exceed normal wear.

You drive a lot each year

Beyond 25,000 km per year, buying is almost always more advantageous. The calculation of the cost of leasing vs. buying a car shifts as soon as excess-kilometre fees come into play.

You want to keep your car a long time

If you plan on keeping your car for eight years or more, purchasing is generally the better option. A long-term car lease, renewed contract after contract, never leads to ownership.

You like changing cars every 3 or 4 years

This is the scenario made for leasing: lower payment, warranty in effect from start to finish, no resale to manage.

You are looking for the lowest possible monthly payment

Leasing wins on this single criterion. But be mindful that a lower payment does not necessarily mean a lower total cost.

Is it more advantageous to buy or to lease a car long term?

Consider two drivers. The first finances an SUV over 72 months and keeps it 10 years: they pay for six years, then drive four years with no payment. The second strings together three 40-month leases: they pay each month for ten years, without interruption.

Depreciation explains the difference. It is highest in the early years and slows afterward. The buyer absorbs it once; the lessee consistently pays the most expensive portion of the curve at every contract.

The payment-free period also changes the family budget. Four years with no monthly bill is several thousand dollars redirected elsewhere. That is the main argument for buying. Our report on the best used SUVs also shows which models retain their value best after that period.

Calculate your annual mileage

Take the odometer reading of your current vehicle and divide by the number of years you have owned it. That is your real figure, not your estimate.

Decide how long you want to keep the vehicle

Under five years, leasing is competitive. Beyond seven years, buying almost always takes the lead.