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Welcome to my padlet focused on leasing versus buying a vehicle. In these posts you can expect to learn the key considerations and implications of leasing and buying a vehicle. You will also have access to tools to help you calculate how your choices may impact you financially – a tool to help choose between leasing and purchasing as well as a tool specific for purchasing to help understand how various elements impact your overall payments. Additionally, for those with interest in having a business or a job where you are able to make tax claims on your car payments, there is information to help you understand those implications for each choice as well!

I hope you will find this information useful!

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This video is a general information video on the topic of leasing a vehicle. They use a catchy and easy to understand 4 keys to understanding your payment (term, downpayment, mileage, residual value) to explain the key elements that define your monthly payment.

I chose this video because it was interesting for anyone specifically looking to lease a vehicle. It helps the viewer understand not only how to determine their monthly payment but also what are the key drivers of their payment which they can possibly negotiate when making their deal. I did not see another video similar to this that was specific for people leasing a vehicle.

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Car Buying Tips & Advice: How to Lease a New Car | Edmunds

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This video is a general information video on the topic of buying versus leasing a vehicle. The presenter explains the differences between each and goes through many of the considerations as to what you should consider when making the decision. They also explain the implications of making your payments extended over several years.

I chose this video because it was very informative, yet it was not completely unbiased. Some people prefer to have somebody help them make the decision and this individual gets into not only what to consider but what he recommends and why. I thought this was an interesting approach versus other content.

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Should You LEASE or FINANCE Your Car In 2022 | MUST WATCH BEFORE YOU BUY

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This video explains the difference between leasing and buying in order to maximize your tax claim in Canada.  This is mainly for business owners or those who qualify for tax claims associated with vehicles but is very informative for this group of people.  They include major factors, Canada Revenue Agency rules and a sample table to help make the decision.  They also went through some very clear examples that really helped inform the viewer on this topic.

I chose this video as I felt although it was applicable to a small group of the population only, it was still very informative and educational on this topic. The tax implications specifically on Canada is not something I saw many other videos covering and not as clearly explained as this one.

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Leasing Vs  Buying a Car for Maximum Tax Claim in Canada

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This video is from Volkswagen Canada and it explains at a high-level differences between leasing and buying a vehicle. It also includes 5 key questions to ask yourself to help you determine if you should lease or buy the car. These questions consider the amount you drive a year, your preference for latest options and technologies, ownership preference, ability to customize the vehicle and preference for driving a newer car. The result of your answers helps to identify for you which method would be most beneficial for you.

I chose this video because I liked the simplistic nature of the 5 key questions. While there is much more to consider and these other elements are included in other videos and websites, this one at least is very simple and helps you understand which one you should investigate further.

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Financing & Leasing Your VW | Volkswagen Canada

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When buying a new car, it comes down to lease vs finance for most car buyers. Volkswagen offers plenty of options that will work just for you!

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This website is hosted by one of Canada’s large banks, Scotiabank. The information provided is a high-level explanation of what it means to lease or buy a vehicle. They also explain the key differences and considerations between each choice, as well as an evaluation of the pros and cons.

I chose this website because I found that it is written in an easy-to-understand format and it is also not biased towards one way or the other, just information sharing designed to educate people on the topic. This differs from some other websites on the topic that are advocating for one or the other.

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To lease or to own? That's the question facing every driver in the market for a new car. The issue is surprisingly divisive, with die-hard supporters on each side.

Lease-lovers adore getting a brand new, shiny car with the latest technology every few years, while owner-advocates are willing to pay higher monthly payments now, for the promise of paying $0 in the future.

Leasing a car means you only pay for the portion of the car you use. You pay the dealership to drive the vehicle for a predetermined amount of time, usually around two to four years. The payments are a mix of principal, interest and taxes. It's usually cheaper than taking a loan out to own the car because you're only paying the depreciation costs of the vehicle over the period of time you are driving it.

In contrast, when you buy a car, you take out a loan for the entire sticker price of the vehicle plus taxes minus your down payment. Your monthly loan payments will be higher than if you were leasing the same car. But the difference is, at the end of the day, when you've repaid your debt, you have an asset. That asset is yours to keep, sell or pass on.

Scotiabank proudly finances vehicles for consumers for several car manufacturers across Canada, including on an exclusive basis, for Mazda, Jaguar Land Rover, Volvo and Polestar.

Whether to own or lease depends on your lifestyle, cash flow and preference.

Let's talk about the emotional factor of leasing first. One of the main perks of leasing is you're potentially able to get a shiny new car for much cheaper than it would cost to buy one over the same term. Only you can decide how important this is to you. If you really love cars and are excited by the latest technology and top-notch performance, these factors may be worth more to you than owning a car.

The second benefit to leasing a car is that it's cheaper in the short term. If you have a tight or uncertain cash flow, you may appreciate lower monthly payments. In order to get similar low monthly payments from an auto loan you may need to extend the loan period to the maximum, sometimes up to eight years - which isn't a great idea because of the added interest you'll need to pay or you will need a large down payment to bring the finance amount down.

The third advantage is flexibility. If you move a lot or aren't ready to commit to a vehicle then why not lease it for three years until you're prepared to commit?

Leaseholders also love that they can just hand the car back at the end of the term and walk away. If you don't want to deal with car maintenance over the long term or who do not want to haggle over trade-in values, leasing may be your best option.

Finally, most leases in the marketplace are typically referred to as 'walk-away' leases because the value at the end of your lease, known as the residual value, is guaranteed. Therefore, if you make your payments and return the car in good condition and within your kilometre allowance, you can drop the keys and walk away.

But leasing may also have disadvantages, like the fact that you will always have a monthly payment. When you own a car, at some point your loan will be paid off and your payments will cease. So while lease payments may be cheaper in the short term, they almost always are more expensive over time because they never stop as long as you keep getting a new vehicle every 2-4 years.

The second drawback is that you have to return your car in roughly the same condition you bought it in. Most lease options allow for normal wear and tear during the term of your lease but may require certain items to be repaired or replaced if there is excess wear and tear. Ask your dealership to clarify what constitutes excess wear and tear as many have brochures available to help distinguish normal from excessive.

The costs to fix it and the hassle of doing so can really add up. There are some products the dealership can sell you when you originally lease the vehicle which can cover for some damages prior to the end of lease term. Make sure to ask a lot of questions about the cost as well as what would be covered versus what is not.

And depending on your lifestyle and how often you drive, you may exceed the allowable kilometre limits; a standard lease allows for 24,000 kilometres per year while some manufacturers offer low or ultra low kilometres options, which are generally around 15 to 20,000 kilometres annually. Those doing inner city driving should be okay within those limits, but those who are visiting friends and family who live further away may be hard pressed to stick to them. If you think you may go over your allotted kilometre allowance, there are options to purchase additional kilometres upfront; if not, you will get charged per every kilometre you go over your allowable limit.

Some people just want to have a car and keep it for as long as possible until it starts needing costly repairs. If you simply need a reliable vehicle to get to work in and drive your kids around in, there's little point to owning a new car every few years. The best way to become payment free is to have a large down payment, find a low interest rate and choose the shortest financing period you can afford. You can check out our auto loan payment calculator to see the difference a shorter time period makes. If you don't have a large down payment or are new to the market your deal may have programs available to assist as well.

Let's say you buy a $25,000 vehicle with $5,000 down at 2.99%. If your loan lasts three years, you'll end up paying around $1,090 in interest. If you push it to the maximum eight years, you'll end up paying $2,920, or 168% more.

Newcomers may also use auto loans to build their credit history - Scotiabank, for example, offers the StartRight Auto Finance program where you can qualify for a loan with no Canadian credit history.

Once your loan is paid off, and assuming you've chosen a well-made car that's built for the long term, you can easily drive it for years after the loan is paid in full. That's a long time without car payments and you can direct that cash flow elsewhere. Of course, you may get into an accident or need to make repairs, but the money to deal with that is almost always less than a car payment would be.

And since it's yours you don't have to fix anything on it that you don't want to and you can drive as many kilometres as you need. You also don't have to worry about keeping it pristine if you don't want, because it's yours.

Like anything you own, you're responsible for it. Many cars, unfortunately, are not built to last forever and the maintenance can get expensive once your warranty expires. You may find that the maintenance costs for some of the larger mechanical repairs can become truly astronomical and may want to consider purchasing an additional warranty to extend the manufacturer's warranty.

Another downside is the depreciation of your vehicle. Some cars have higher depreciation than others and this may affect whether you can trade in your vehicle or not, as you may have to pay off more of your loan to be in an equity position (your car is worth more than you owe). If you want to trade in or trade up, you might be surprised at how little value your car truly holds after a few years.

Ultimately, leases are good for those who want more flexibility. They want to drive the latest vehicle, pay a reasonable monthly rate and trade it in for the next hottest thing in three years. Buying a car is good for those who like to keep their cars for a longer period of time or drive lots of kilometres each year. They're in it for the long-term and have the cash flow and motivation to pay off their auto loan as soon as possible. Check with your dealer and ask lots of question to see what the best option is for you.

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Planning to get a car and thinking about whether to buy or lease? Here are some pros and cons to help you make the final decision.

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This website brings you to a car loan calculator tool. This is a tool for people looking to purchase their vehicle and take on a car loan. This tool allows you to adjust all the various aspects which would make up your loan to see how it would affect your overall payment as well as the overall amount you end up paying for the car including interest.

I chose this website because I thought this was a very informative tool for people when making their decision. I thought it was very interesting and helpful to be able to make changes to all the different factors (e.g., interest rate, downpayment, car price, length of loan, etc).

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Auto loan payment calculator Looking to buy a new car? We’ll do the math for you. Window.imageRenditions("15226ab3-2618-2ad8-1dc4-9ff184bcef77");

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Auto Loan Payment Calculator | Scotiabank Canada

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Looking to buy a new car? We’ll do the math for you. Scotiabank free auto loan calculator gives you estimate for car loan, monthly payment, interest rate, and trade-in value.

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This website brings you to a buy/lease calculator tool. This is a tool for people trying to decide between buying or leasing a car. This tool allows you to adjust all the various aspects which would make up your loan or lease and it shows you the difference in how much it costs you overall with everything considered.

I chose this website because I thought this was a very informative tool for people trying to decide between which approach to take. The information was different than just looking at payment – it looked at net cost of buying or leasing in the scenario which I did not see on other sites.

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Should you lease or buy your car? Use this calculator to find out! We calculate your monthly payments and your total net cost. By comparing these amounts, you can determine which is the better value for you. Javascript is required for this calculator.

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This website reviews the differences between tax implications in Canada for buying a vehicle versus leasing one. It discusses the basic rules for each, and it also includes a case study to further explain the points. Within the information are references to the Income Tax Act (ITA) as well for individuals to refer to separately if desired.

I chose this website because tax implications are not something that normally comes to mind for this topic. I did not see many other sites covering this sort of information on the topic of buying versus leasing and thought it is information people should consider when making their final decision.

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The cost of purchased vehicles is expensed on the income tax return through depreciation, under two specific CCA classes, class 10 [ITR 1000(a)(x)] and 10.1 [ITR 1000(a)(x.1)]. This can be done as an or a self-employed individual. The prescribed depreciation rate, on a declining balance method, for both of these classes is 30% [ITR 1000(a)(x) & ITR 1000(a)(x.1)]. The ITA sets the limit on the value of the vehicle you can amortize to $30,000 plus applicable sales taxes [ITA 13(7)(g)]. Vehicles purchased above this $30,000 limit are classified in class 10.1 [ITR 1000(a)(x.1)].

For leased vehicles, the amount deductible is determined by the following [ITA 67.3]:

Lesser of:

a) Actual lease payments

b) Lesser of:
($800 + Sales taxes X number of days vehicle was leased) - lease payments deducted in prior years
30

Or
($30,000 + Sales taxes) X total lease payments
85% (list price or $35,294 + sales tax, whichever is more)

As with a purchased vehicle, lease payments are also capped to the equivalent of a lease payment for a $30,000 vehicle.
Comparison Through a Case Study
To compare the deductibility of purchasing vs leasing a car, we will look at a case study. The basic assumptions we will make are that the vehicle will be new, and the list price will be around the Canadian average price for new vehicles sold, which is $40,000, no down payment for either a purchase or a lease, and the vehicle will be used entirely for the business.

Note 1: Assumptions - 50% residual, Ontario lease, 3% interest. Computed at: http://www.apa.ca/LeaseCalculator.asp

Note 2 - Lease (Ontario): [($30,000 + $3,900) x $8,543] / 85%($40,000) = $8,518

Purchase: Class 10.1 - [3 X ½($30,000 + $3,900)] X 30% = $15,255

Note 3 - Lease (Ontario): [($30,000 + $3,900) x $8,543] / 85%($40,000) = $8,518

Purchase: Class 10.1 - $18,465 X 30% = $5,594

Note 4 - Lease (Ontario): [($30,000 + $3,900) x $8,543] / 85%($40,000) = $8,518

Purchase: Class 10.1 - $13,012 X 30% = $3,915

From the case study above, we see that, as far as the expense deduction goes, a car lease slightly edges a purchase over 36 months. For the purchased vehicle, we see in the first year that the deduction is high due to the Accelerated Investment Incentive , which triples the depreciation rate in the first year. However, in the following two years, the lease expense deduction catches up and surpasses the purchase expense deduction cumulatively.

Would the findings above tip the scale as far as the leasing vs buying debate? Not likely when you consider the exhaustive research that shows that in the long term, buying is the much better financial option. The tax advantage of leasing will not likely make up the difference in overall long-term cost advantage of buying the car.

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Buying vs Leasing a Car - Tax Implications

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One of the age-old personal finance questions: is it more advantageous to lease a vehicle or buy? While there's an exhaustive list of articles on the internet about this topic, this article will look at the tax implications of each and compare the two.

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This image evaluates the differences between buying or leasing a car over a number of specific criteria.

I chose this image because it is a very clear way to frame up the summary and it included interesting points I did not see elsewhere, for example consideration for having bills as well as being bound to a time commitment.

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This image details a specific example of the cost of leasing versus buying a specific car at a specific price. This is helpful in understanding the differences with a real case.

I selected this image because it is very clear and easy to understand. I did not see other images that give a specific example and include the total cost spent with each option visually.

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What I learned about this topic that surprised me the most:

What surprised me the most about this topic is how much the longer loan terms affect the total amount you end up paying for a car when you buy it. By playing with the calculator tool I was able to see that you can add thousands in interest to the price of the car by extending your loan timeframe and unless you are able to negotiate a very low interest rate. Many people are tempted to extend the payment over a longer term to make the payment lower to be able to afford a more expensive car but it is actually better to get a car you can afford to pay in a shorter timeframe (maximum 5 years).

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A real-life example of how this topic is relevant or interesting for me:

This topic is relevant for me as I currently have a vehicle that was given to me by a family member but when I need to replace it which will be in a couple of years, I need to trade it in to either lease or finance a new car. This information will be very beneficial to me to help me make the best financial decision.

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If I could pass this on to a family member or friend, what do I think is the most important thing to pass on?

The information I would pass on would be that there is no right or wrong answer to the question whether to buy or lease. It all depends on your situation and your preferences as well as your lifestyle. People should not be pressured by individuals that have strong opinions on the topic and consider their own situation and relevant details before making the decision.