Leasing a Car in Canada – 5 Requirements

Are you considering leasing a car anywhere in Canada? Lots of people are confused about what they need to lease a car in Canada. If this sounds like you, no worries. We’ll run you through what you need to lease a car in Canada.

The brief guide below addresses these common concerns:

  • What qualifies you to lease a car in Canada?
  • Is car leasing worth it?
  • How much does it cost to lease a car?
  • What are the benefits of leasing a car?

What qualifies you to lease a car in Canada?

To reach a lease agreement, the lessee is expected to meet some basic requirements, including:

  • Being a Canadian citizen – or a legal immigrant
  • Must have attained the legal age in the concerned jurisdiction
  • Must own a driver’s license issued by the Canadian authorities – learner’s permit is unaccepted.
  • Must have a reasonable and steady source of income
  • Vehicle rental agencies and auto dealers are ineligible

That said, the following are ineligible for lease in Canada:

  • Vehicles imported from the U.S
  • Cars with records of accident
  • Cars tagged ‘rebuilt,’ ‘irreparable,’ or ‘salvage’

What Credit Score do you need to lease a car in Canada?

A credit score of 740 or above will get you a car lease with most lenders. They will also most likely offer you the best rates. A credit score of between 680 and 739 will also most likely be approved for a lease. 620-679 on the other hand will likely be approved but will attract a higher interest rate.

Persons with credit scores below 619 will pay a much higher rate if you approved at all.

Is it worth it to lease a car?

Whether or not car leasing is an ideal option boils down to some factors – tied around lifestyle and, of course, budget.

Before you opt for a car lease agreement, consider:

Mileage

Most Canadian leases allow 24,000 as maximum mileage, annually.

So, if you don’t drive long distances, you may consider a lease.

Driving many hours may attract some costs related to wear and tear.

Leasing vs Buying a Car

While monthly payments for a car lease are reasonably lower than buying the vehicle, a lease does not give you absolute ownership.

Commercial or private?

If your business requires you to own a car, lease payments and insurances may easily fit under expenses, allowing for a desirable tax incentive.

How much does it cost to lease a car in Canada?

Note that the cost of leasing a car varies across the 10 provinces in Canada.

However, to calculate lease cost, add up estimated depreciation during the lease, taxes, fees, and rent charges. Then, divide the total by the months the lease contract spans.

So, if, for example, the lease duration is 36 months and estimated depreciation – and all other costs/fees – sums up to $13,000, the monthly payment rates will be approximately $360.

What are the benefits of leasing a vehicle?

If you’re considering leasing a car, here are some major benefits of leasing a car in Canada:

You have access to a new car, always

If you go leasing, you’d always have access to drive in a new car. Of course, many – particularly car fanatics – consider this an impressive plus.

Reduced maintenance

While car owners encounter maintenance issues that come with age, it’s a whole different ball game for leasing. Before you begin to notice any issues, you may turn in your car. This remarkably lessens users’ stress, particularly for on-the-go persons.

Tax written off as expenses

Leasing is a big perk for small-scale enterprises. For self-employed or commissioned sales, your lease may be written off as a business expense. Based on mileage covered and general usage, you can write off up to 80%.

Access to a luxury car

Most people you see in flashy cars do not actually own them – they are often leased. Since most banks often limit car loans to not more than $30,000, for many, leasing sounds better.

Law Upfront fees

Talking cost, you can start driving your car around without breaking the bank. Most leases do not include down payments; monthly rates or sales tax are significantly lower as tax is not paid for the actual worth of the car.

In fact, you may end up paying only half the supposed sales tax compared to owning the car.

Residual value

Your vehicle’s value after your lease period is referred to as the residual value. When the residual value is inflated, you may pay relatively less on your monthly payments – not without some legal scares though.

However, realistic residual value helps you sell your lease easier, trade the car before the lease runs out, or purchase the vehicle after lease completion.

Investment in assets that appreciate

Cars – regardless of present worth – lose value with age. Leasing affords you an opportunity to spend less on cars and channel other resources to more promising investments.

Flexibility

Car loans are usually long-termed and typically stretch borrowing. Leasing, on the other hand, allows you to turn over your car within a relatively shorter duration.

You may, at any time, decide to settle the difference between the lease pay agreement and completely own the car. Or better still, opt for a new one. A finely structured lease offers a range of options.

Are you stuck between leasing and purchasing a vehicle in Canada? A car lease calculator will offer you even more insight.

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