What happens at the end of a car lease
There can be unpleasant surprises at the end of a leasing term, Wallcraft added. The vehicle will be examined carefully for any damage, and if you exceeded the mileage outlined in the contract, you’ll be hit with fees. “It can be a pretty surprising amount at the end of the whole thing,” Wallcraft said, “and there’s no way to get out of it.”
When to buy a car in Canada
When you finance a car to own it, however, you start with negative equity—you owe more on the car than it’s worth to sell—but after a certain amount of time, that equity turns in your favour. “It takes a few years, depending on the length of the financing term,” Wallcraft said. “It takes some time where you’ve paid off enough of the car that you can then sell it for what it’s worth.”
For car lovers who want a fresh ride every three or four years, financing to own still has merits over leasing, Wiebe said. “Even with purchasing vehicles every three years, you can still come out ahead by purchasing and reselling, because at least you are building some equity by creating ownership of the car that you’re paying for,” he said.
“But for most young people, buying and owning for a longer period is going to really free you up to be able to put money elsewhere, especially towards longer-term savings.”
Pros and cons of leasing an EV
As for leasing an electric vehicle (EV), Wallcraft called the financial pros/cons analysis “less predictable” in this relatively new market. Residual values of EVs have yet to be fully understood, she said—the value the car holds over time, which lease payments are based on.
But lease contracts are very hard to break, Wallcraft noted. So if you don’t like the EV lifestyle and all it entails, you’re stuck or punished.
“I can’t imagine how difficult it would be to try to offload an EV lease and try to find somebody who wants to take that over when there’s really only 10% of the market that’s showing a strong interest in EVs today,” Wallcraft said. “That will change over time, but that would be extremely difficult. Better to finance at a rate you can afford, and then, even if you haven’t fully paid it down, at least the car is yours to make the decision about what to do with it.”
So who is leasing for?
Wealthy customers, mostly. There’s less drama with a new vehicle under warranty, Wiebe pointed out. “Let’s say you’re getting into a high-paying profession that demands a lot of your time,” he said. “You’re not having to deal with buying and selling a vehicle. You sign up, have that simple payment, everything’s under warranty, and you kind of take back both the time and having to think about that area of your life.”