Sooner or later, you may need to buy a car. Depending on where you live, this is either a convenience or a necessity. Buying a car in Canada is a little different than buying it in other countries. There's basically 3 ways to get a car in Canada.
1. Buy it outright.
2. Finance it with a loan.
3. Lease it.
Number one is simple, pay cash, you're done.
The second option is basically buying a car by putting a downpayment and financing the balance by borrowing from the bank or a financing company. You will want to shop around on this one to get the best rates. You don't usually have to go to your bank if you are going to get a loan to buy a car since car dealers often offer in house financing.
The difference is the interest rates you're going to get in getting the loan. Wait for a good deal as car companies often offer promotions to get people to buy their cars. The best rates are usually near the end of the year to move out last years inventory.
You can either go with the dealers finance company or look for a financing company that offers a good rate and ask them if they can get the car you want for you. Some will do that even if they don't usually sell a particular brand.
The third option where you lease a vehicle is one of the most popular options, the way it works is basically you only pay for half of the vehicle's value over a period of time say over 48 months or 4 years.
Let's say a car is worth $30,000 and you want to lease the vehicle. They will usually offer you a lease term of where you'll be paying a monthly payment over 48 months and your lease payments will be based only on $15,000 instead of the full $30,000. So your payments are half of what you will be paying monthly compared to buying the car. At the end of the lease term, you can buy the car outright by paying out the balance or financing the balance.
If you decide not to keep the car, you can lease another vehicle or just return the car. Normally, you can only lease vehicles less than 3 years old. Anything older, you usually have to buy it.
The rule of thumb whether to lease or buy a vehicle is this. If you are in business for yourself and are writing off expenses for business. Then lease is a good option. Also, if you like to change cars often, then leasing is a good idea as well.
If you're not self-employed or can't write anything off for taxes. Then buy or finance your car instead of leasing.
Just remember, leasing does not make for sound financial planning as leasing is basically like renting the car for a few years. No matter what the dealer tells you, you don't own the car when you're leasing it. Just look at who's named on your car registration and insurance when you lease a vehicle and it will tell you who owns it.
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2 comments:
Hello bor, congratulations for this blogsite. This is really helpful and informative (all articles). By doing this, you are unselfishly helping other people setup or startup in another country, be it Canada or elsewhere. These are the essentials that one should be aware of when migrating. Keep it up bor, who knows I might need it when I migrated to another country.
Leasing is a great alternative to buying, but it can cost significantly more than originally expected if you put a lot of mileage on the car (roughly 25,000+ kilometers per year, depending on the lease). If you exceed the mileage limit, you have to pay for every extra kilometer when you return the car, which can add up to a significant sum of money.
Leasing is good for a city commute car, but if you like long road trips, you're better off buying the car.
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