Planning Your Purchase

Should You Lease a Car, Buy It New, or Buy It Used? 

With ridership on subways, buses, and other means of public transport on the decline in the wake of the pandemic, and patronage of rentals and ride-sharing apps slumping as well, many Canadians who never before saw a need to own a car are changing their minds.

Should You Lease a Car, Buy It New, or Buy It Used?

Planning on buying a new car, leasing one, or purchasing a used vehicle? Stop! Don’t do anything before you read this expert advice!

A vehicle is an extension of your home. It can take you where you want to go without having to mingle with the commuting public. Unfortunately, although a car is more than ever a necessity, not everyone can afford one.

Whether you’re living paycheck to paycheck or are a retiree with a considerable amount of money set aside, purchasing options are available that are appropriate for your budget, lifestyle, and needs. If you choose a brand-new car, you can take advantage of promotions that require a low down payment and an affordable monthly installment. If you don’t want to burden yourself with monthly payments, you can buy a used car instead. Or you can lease one. Read on to learn more about the pros and cons of each alternative.

Considerations When Buying a Car

Is the car that you want to buy a need or want? Is it for business or personal use? When you’re expecting a financial return for your investment in a car, it’s okay to invest in your quality of life.

A related consideration is your budget. When you buy a car, you lose the opportunity to invest the money for the car in assets that are likely to grow and pay you dividends in the future. You have to save early and often to enable compounding to do its work. Buying a car that is too expensive for your budget is like negative compounding. Of course, this doesn’t mean that you won’t benefit from owning one. You are paying for convenience and safety.

How many people do you expect to carry in your car? If you have a big family, it may be wise to invest in a van or other vehicle that can hold seven or eight passengers yet still have enough room for luggage and other things you might pack in the trunk. If the car is just for you and just for driving in the city, you can get a small sedan that can handle four people at once.

Also, consider:

  • What kind of car do you like: off-road, dirt road, street?
  • Do you live in an area with long cold winters?
  • How far is your workplace from your home?
  • Do you need an active four-wheel drive system?
  • What safety and security features do you want?
  • Do you tend to carry a lot of things when you’re driving?
  • Do you have your own garage, or do you share a parking space with other car owners?

Think about whether you want an automatic or manual transmission. If you are used to urban driving, an automatic may be better. If nothing else, not having to keep pressing the clutch on and off will reduce driver fatigue. If you travel long distances or are used to driving on faster roads, a car with a manual transmission may be better.

Also decide whether you want to buy a new car, buy a used car, or lease a car.

When you buy a new car, you don’t have to worry about the condition of its engine, body, and other parts. But even buying a used car can be a sound decision if you thoroughly check its engine and parts. If you lack the money to make a down payment or to buy a secondhand vehicle, it may be best to lease a vehicle until you can afford a more permanent alternative. That’s better than taking out a high-interest loan and struggling to pay a hefty monthly installment.

You buy a car to make life easier. But if you can’t comfortably afford a car, trying to buy one anyway can quickly make life harder instead.

Pros and Cons of Buying a New Car

If money is no object, it’s easy to go for a brand-new car. But cars are not cheap. Even if you have the means, you should think through your decision and make sure you can live with it until the vehicle is fully paid off.

Advantages of Owning a Brand-New Car

  • A fresh start. Owning a brand-new car is like getting a fresh start in life. Its condition being pristine, you can expect that the car and its components will be in good working order. No dents or dings either, and not much mileage on the odometer. The whole life of the car is ahead of it.
  • New features. Carmakers keep innovating. The gadgets and features of a car launched this year can easily be much more advanced than the gadgets and features of a car launched two years ago. For example, earlier models lack the radar-based system for mitigating collisions that were introduced in 2020 vehicles. As a stand-alone purchase, this system costs $1,200 to $1,500. And you can’t easily install it in older vehicles.
  • Customizability. If you have the patience, you can buy a new car from the dealership with exactly the options you want. The dealer may need to especially order it since the cars on the lot usually come with only the most popular options, the options most likely to attract buyers. If a model with lots of options doesn’t sell briskly enough, a dealership is unlikely to have it on hand. The same goes for colors. You’re more likely to find popular colors like black, silver, and white than colors like brown or green. Finding a used car with all the features you want can be a lot harder, like finding a needle in a haystack. If you’re buying a new car, though, you can get pretty much any available feature.
  • Better warranty. When you purchase a used car, you must make do with whatever time or miles are left on the warranty, if any. With a new car, though, you get a new factory warranty that will cover the vehicle for a long time.

Disadvantages of Owning a Brand-New Car

  • More expensive. New cars cost more than used cars.
  • Higher taxes. Taxes are usually based on the car’s selling price. If the price of the car is high, the sales tax will be high. Depending on the province, you may also be charged various local taxes.
  • Many fees. Buying the car and paying the taxes for it is not the end of the story. You must also pay for insurance, a destination charge, documentation or processing fees, an advertising fee, an extended warranty fee, a dealer preparation fee, a fee for etching the vehicle identification number (VIN), and the costs of fabric protection and paint protection. Some such expenses are optional. But you have to determine what to get and what to forego.

Pros and Cons of Buying a Used Car

If you have a modest budget or are seeking an older model that is no longer on the market, your best option may be to buy a used car.

Advantages of Buying a Used Car

  • Lower price. A new car begins depreciating the moment you drive it off the lot. That’s not so good for the owner who has decided to sell it. But it’s good for you. It means you can get a fresh-smelling vehicle in good working order that may have been used for just a few months—yet save hundreds or thousands of dollars.
  • Lower insurance rate: The insurance rate for a used car is significantly lower than the insurance rate for a brand-new car.
  • Less depreciation: Cars depreciate most rapidly during the first year of usage. If you buy a car that is two years old or older, it can’t depreciate much further. To the extent it does further depreciate, it does so much more slowly. This means that if you keep a used car in decent shape when you sell it again you can probably get close to the price you paid for it yourself.
  • Easy to assess. These days, you can check the history and market value of a vehicle on the internet. provides links to sites where you can find vehicle history reports.

Disadvantages of Buying a Used Car

  • Questionable quality. Used cars come with a history. Regardless of the info, you dig up about the car, it can be hard to tell how well it has been performing or how well it was treated by its previous owner. It may have been in the shop frequently because of a recurring defect. Perhaps it was involved in a major collision that required extensive restoration. The car may even have a rebuilt title that you should know about.
  • No manufacturer’s warranty. Eventually, the warranty issued by a Canadian car manufacturer lapses. When that happens, the owner must directly shoulder the cost of any repairs for defects or damages. If you buy a secondhand car that has three or more years on it, expect to pay for all maintenance expenses, including any major repairs that are necessary. Things could get messy if you buy a used car with lots of mechanical problems that were not immediately evident but that become evident soon enough.
  • Outdated options. Car manufacturers continue to offer the very latest, cutting-edge options to their customers. The rapid advance of technology means that the specifications and features integrated into newer models are often unavailable for older ones.

Pros and Cons of Leasing a Car

When buying either a new car or a used car is beyond your budget, the soundest option may be leasing a car. If you try to buy a car you can’t really afford, you may have to take out a bank loan and make payments of the principal and interest monthly. Some car loan contracts contain provisions that allow the lender to demand the total amount due (including interest) when the borrower fails to pay a single monthly installment. If you can’t comply, your car will probably be towed immediately. Steer clear of such contracts if at all possible; the risk is too high.

Advantages of Leasing a Car

  • Lower monthly payments. Lease agreements make it possible for you to drive a car in its ideal state at a low price. You don’t have to pay the fixed monthly installment of a bank loan. Instead, you pay the cost of the lease. With a loan, your monthly payments continue until you have fully paid the total cost of the loan. This is not the case when you are leasing a car. When the lease agreement expires, you can either lease a new car or buy the car you have been leasing (at a now-depreciated price).
  • Drive a new car model. Most car-leasing companies frequently upgrade their car selections. If you keep leasing, you will be driving a brand-new car each time. You don’t need to burden yourself by buying a new car you can’t afford. Just lease it at a reasonable price.
  • No need to worry about changes in the market value of the car. Unless you decide to buy the car, you can be blissfully ignorant about how rapidly it will depreciate. You can let the owner worry about that.

Disadvantages of Leasing a Car

  • No tangible return for your expenditure. When you lease, you pay a significant amount of money to the owner, but you build no equity with the money you have sent. It’s just like renting an apartment for a while. When the agreement expires, it goes right back to the owner.
  • The necessity of paying for excessive wear and tear. If you don’t take good enough care of the car you are leasing, the owner may charge you for excessive wear and tear when you return the car at the end of the lease.
  • Termination fees. If you terminate the lease contract prematurely, you will be liable for hefty termination fees and penalties. The total amount of these fees may even be comparable to a monthly installment on a loan to buy a brand-new car. So be sure to carefully review the provisions of the lease agreement concerning the end of the lease.

Conclusion and Recommendation

In many ways, the buyer has the upper hand when buying a car. The proof is that you are offered so many choices and options. Turn the situation to your advantage. Carefully evaluate your needs, specifications, and budget, and use what you learn to buy the right car for you.

If you’re on a tight budget, don’t overextend yourself to buy a car just so you can boast about it. Like getting married, getting a car is a one-day event. Then the excitement fades and you have to spend years paying for the loan while also struggling to get by. Buy a car that is consistent with your budget and appropriate for your lifestyle. Learn about the car’s warranties and any penalties you may be subject to so that you are ready if and when the car needs repairs or you must cope with other car-related expenses.

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