Should you buy or lease your new car?

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Buying your first car is a major purchase—next to buying a home, it’s one of the largest purchases you’re likely to make in your life. And whether you opt for new or used, you still need to figure out how you’re going to park it in your driveway.

Choosing the fun stuff like make, model, and colour are all important, but each of those choices often comes with an impact on the bottom line. Having enough cash to buy a car out right isn’t always in the cards, so it becomes a matter of whether you lease or finance to buy your new whip. There are pros and cons to financing or leasing a car.

Leasing vs financing a car: What’s the difference?

In simplest terms, leasing a car means in exchange for regular payments, you get to drive a vehicle. In a little more detail, there are terms and conditions you are agreeing to, and how long you get to have the car is determined by the vehicle manufacturer or the car dealership who is supplying the vehicle. At the end of the leasing term, you return the car.

With financing on the other hand, you are borrowing the money to buy your ride and are agreeing to pay off the amount owing plus interest over a set term. At the end of your financing term, you own the vehicle.

Leasing vs. financing: What does it mean for your monthly budget?

Regardless of which option you choose, owning a vehicle will impact your monthly budget. If you choose to finance, your loan is based on the full purchase price of the car plus interest over the term of the loan. When you lease, the monthly payments are based on a vehicle’s depreciation over the term plus interest. In general, leasing gives you a lower monthly payment than financing, but they have very different outcomes at the end of their respective terms. Leasing may be your best option if your cash flow is tight, but leasing also means you will always have a payment to account for. Financing by comparison eventually leads to freedom from car payments, once you’ve paid everything off.

Have you thought about maintenance costs?

Vehicle upkeep can be costly. Brand new vehicles typically require less maintenance than older models, meaning you are not forking out unexpected upkeep or maintenance costs with a newer ride. Finance terms are generally longer, so you may come out of your term car payment free, but an older vehicle may require more maintenance and upkeep, which you need to consider when planning your monthly budget.

Do you yearn for that new car scent? What are the benefits of a new car?

Who doesn’t love that new car scent? One of the biggest appeals of leasing is the opportunity to drive a new car every couple of years. Once your lease is up, you turn in the keys and decide what you’d like to do next. The problem with this is you will always have a car payment, whereas with financing you’ll be eventually car payment free, but in an older vehicle.

What’s your lifestyle? Will it impact how you treat your car?

With leasing, anything done to your vehicle, including damage after you drive it off the lot, could end up costing you. For example: Are you into long road trips? Do you basically live out of your car? Are you prone to minor fender benders? Want to ‘pimp your ride’? You may want to consider buying. When you own it, you can do what you want with it. When you lease a vehicle, there are terms you agree to that include things like normal wear and tear, kilometer limits, and more. That means you need to make sure you return your ride the way you agreed to in your lease agreement..

How much are you driving?

Do you have a lengthy highway commute to work every day? Leasing may not be a viable option. When you lease a vehicle, you usually have a kilometer range as negotiated when you agree to lease the vehicle. If you do not stay within the agreed upon kilometer allotment, you are at risk for being charged a fee per kilometer over the limit at the time you return your vehicle. With financing, you are free to rack up all the kilometers you want.


There are several considerations when purchasing a vehicle. Ultimately the choice between financing and leasing really depends on your lifestyle, needs, and most importantly, budget. No matter what you decide, just make sure you take the time to consider all your options beforehand. Check out our free First Timer’s Guide to Buying Your First Vehicle or talk to with a representative from your local credit union for advice on what options suit you. Happy trails!