How To Lease A Car

How To Lease A Car

Would you like to know how to lease a car in Canada? Perhaps you have weighed up your financial situation and determined you cannot afford to purchase a car. So you have opted to lease one instead.

If you are looking for information on how to lease a car in Canada, you are in the right place. 

We have put together a guide covering everything you need to know about how to lease a car. We will help you understand the pros and cons associated with leasing a car, as well as the leasing options available to you. Read on!

Advantages of leasing a car

Leasing a car can often come with huge benefits. 

Firstly, you will incur lower payments when you lease a vehicle as opposed to buying one. You do not pay the price of the car and, instead, only cover its depreciation value. In most cases, the leasing price amounts to between 50% and 60% of the price of the car.

Secondly, when you know how to lease a car, you will have found a great solution to your transport needs. Upon assessing your transport needs, you could decide to lease a car to travel to and from work or other activities.

Third, car leasing is a good option for people who have not yet made up their mind about which car they want. The average leasing period is between 2 to 4 years. Therefore, you can essentially test drive a different model with each lease period.

Disadvantages of leasing a car

Before you consider how to lease a car, it is good to note that you may encounter some challenges when leasing. 

The first, and possibly the most obvious, is that you will not own the vehicle you lease. You will sign a contract when leasing a car and, once the contract expires, you must return the car to the owner. If you want to continue using the vehicle, you will have to sign a new leasing contract.

Another disadvantage is that the leasing contract comes with a myriad of terms and conditions. Some of these terms and conditions could lead to penalties if you do not adhere to them. 

You may also incur additional costs if the car gets damaged or experiences considerable wear and tear. If you are not careful, you could end up paying more for the leased car than the price of buying a new car. 

Finally, if you have any difficulty paying the monthly leasing payments and want to end the contract, beware. You might be forced to pay the full value of the remaining amount on your leasing contract.

Therefore, as you contemplate how to lease a car, consider all the factors that may affect your leasing contract. 

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Car leasing options in Canada

Standard rental lease

You could choose to go for a standard rental lease option once you have determined how to lease a car. This option allows you to lease and drive a brand-new vehicle once your credit score is approved. To lease the car from the dealer, you will be required to make a down payment. Thereafter you will incur monthly payments until the contract expires.

Once the leasing contract expires, you must return the vehicle to the dealer. However, you have the option of keeping the same car by extending the leasing period. If you would like to drive a new or different model, you can trade-in for another car.

Lease takeovers

Did you know that you can take over someone else’s lease agreement? This option offers lower initial charges than when entering into a new agreement.

However, lease takeovers are not always advantageous. You may inherit a vehicle that has mechanical or other issues. These issues might cost you more when the leasing contract expires.

Therefore, while assessing how to lease a car through the lease takeover option, go through the lease terms and conditions carefully and check the vehicle’s condition. 

Leasing to own

You may want to lease a car, but your credit score does not allow you to qualify for a lease agreement. In this case, you could engage in a lease-to-own contract, which is primarily offered by smaller dealerships to clients with poor credit ratings. They allow you to lease a car and then purchase it once the lease term expires.

With this type of lease contract, you will make regular payments, usually weekly or bi-weekly. The advantage is, that you will not only pay for the cost of using the car but will also accumulate equity. 

Dealers offering this lease option will request your proof of identity, income, and residency, as well as evidence of insurance. That said, this leasing option will not give you the option to select a brand-new car, as with the standard rental lease.

Leasing a used car

When exploring how to lease a car at a lower cost, you might consider leasing a used car. Leasing a used car will allow you to reduce your down payment when starting a leasing contract. Selecting the lease-to-own option is one way of leasing a used car. Another is the lease takeover, which gives you the option to select a used car.  

We should, however, mention that there are a few disadvantages to leasing a used car. You may think you are saving money, but you could end up paying out more than you had initially planned. 

When entering into a leasing agreement for a used car, it is important to inspect the vehicle and lease terms, thoroughly. Taking note of the terms will reduce the risk of incurring unexpected costs when the contract expires.

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How to lease a car in Canada

So, how do you lease a car in Canada once you have made up your mind? Have a look at the following guide for more information on how to go about leasing a car.

Consider your credit score

Before car dealers enter into a lease agreement with you, they will check your credit score. They will examine your credit history to see if you can commit to an agreement and honour your payment obligations. 

Your score should be above average for your lease approval. Therefore, as you explore how to lease a car, ensure that you check your credit score. If your score is below average, try to improve it.

Determine a budget

It is crucial to create a budget for the leasing costs you are willing to pay as you think about how to lease a car. Consider all the payments you will incur. Also, calculate the fuel, insurance, and maintenance costs of the car you would like to lease.

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Do thorough research

There are many car dealers in Canada offering car leasing services. It is essential to research different dealers, their leasing terms and conditions, and their charges. This research will help you to settle on the best deal for your needs. 

It is also crucial to decide on which car model you want to lease and why. Ask yourself what the primary purposed of the vehicle will be.

Request a test drive

Before you settle on a car lease contract, book a test drive for the car you like. A test drive will help you to select a vehicle that better suits your needs. 

Therefore, as you think about how to lease a car, do not forget to test drive your chosen car before signing a contract.

Assess your down payment

The down payment is the initial lump sum payment you make when you enter into a car lease agreement. Your ability to pay a sizable down payment will increase the chances of your car lease application being approved. 

With a larger down payment, you will be able to lower your monthly installments. Therefore, consider the amount you can pay as a down payment and how it will impact the agreement.

Evaluate and sign your lease contract

You are about to get the car you want to lease. But, before you sign the agreement, make sure you read through the terms and conditions provided carefully. 

Review key information such as the down payment, monthly payment, lease period, car maintenance terms, and other requirements stipulated. If you are satisfied with your agreement, you can go ahead and sign the contract.

Begin paying your installments

The two primary costs associated with leasing a car are the down payment and the monthly installments payable for the duration of the lease period. 

Once you get the car, it is essential to start honouring your payments as agreed. Paying your installments regularly and on time will help to improve your credit score in the long run.

Keep the car in good condition

While leasing the car, it is crucial to adhere to the maintenance schedule for the vehicle to ensure it is in the best possible working condition. 

If there are any issues, it is best to sort them out early to avoid causing further damage to the car. You could otherwise end up paying additional charges when you return the car to the dealer.

In conclusion

Car leasing dealers in Canada are readily available but, before finding out how to lease a car for your business or family, it is advisable to think things through. Consider the benefits and the risks that come with leasing a car. If the pros outweigh the cons, go ahead and choose the leasing options that best suit you.

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FAQs about Leasing A Car

What is a car lease?

A car lease works by allowing you to pay for the use of the car, instead of borrowing money to buy a car. By leasing a car, you you get all the benefits of ownership by monthly payments.

Why should I lease a car instead of buying one?

If you buy a car, you will need to get a car loan which you would have to make payments for over a period of time. If you lease a car, you’re just paying for the running cost of the car including: petrol, service, registration and insurance – all in one payment.

Is it easy to get approved for a car lease?

It’s easier to get approved for a car lease instead of a car loan. It’s easier and faster for your application to be approved. Once the contract expires, you must return the car to the dealer.

Can I choose the car?

Yes! You’re not restricted to a certain car, you are free to choose whichever you want as long as you can afford it. You will not pay GST on the cost of running the car and the purchase of the vehicle as well.

How long can I lease the car for?

It depends where you go but it could be over any period – from one to five years. Once the lease period expires, you can choose to renew or ask for an extension of the lease or even purchase the vehicle at its current value.

June 19, 2021
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