Auto Lease vs. Finance

Helping You Resolve the Dilemma

To lease or to finance your vehicle, that is the question. You’re not alone if you are a bit unsure. This isn’t a cut-and-dry decision because it depends not only on financial comparisons, but also on individual priorities and preferences. Let’s start with our side-by-side checklist to help guide your decision.

Ultimate Lease vs. Finance Checklist

Leasing is a good option if you…
Financing is a good option if you…
Vehicle Frequency
Like having a new vehicle every 3-4 years with the latest features
Typically drive your vehicle for 5-10 years
Drive less than 24,000 kilometres annually
Drive more than 24,000 kilometres annually
Like having your vehicle under warranty
Do not mind your vehicle out of warranty
Are not concerned with owning a vehicle
Usually keep your vehicle after the loan is paid off – want to own your vehicle outright
Keep your vehicle as delivered and will not customize it
Like to modify or customize your vehicle’s appearance
Tax Advantage
Qualify for tax advantages when you lease as a business owner
Do not qualify for tax advantages

Vehicle Lease or Buy Calculator

Use the Vehicle Lease or Buy Calculator available through the federal Office of Consumer Affairs to compare the costs to finance, lease or lease/buyout a vehicle over time. The calculator can also show you how much you can save when you pay yourself monthly after your car loan is fully paid off.

Go to the Calculator

Fundamental Difference Whether to Finance or Lease


Automobile financing allows for the purchase of a vehicle. When you buy, you pay the entire cost of a vehicle regardless of how many kilometres you drive it. You typically make a down payment, pay all applicable taxes in cash or roll them into your loan, and pay an interest rate determined by your financial institution based on your credit worthiness. Most loans are for a term between 36 and 60 months, but can go up to 84 months. You make monthly payments and may pay off your loan at any time without penalty. You can pay less each month with a longer term, or you can shorten your term with a higher monthly payment to drive a new car sooner. Once the loan is paid off, you have an outright ownership of your vehicle also known as clear title.


Automobile leasing allows for the use of a vehicle during the lease term which is typically between 24 and 48 months, and up to 60 months. When you lease, you pay only for a portion of a vehicle’s cost, which is the part that you “use up” during the lease period. You have the option of not making a down payment, paying taxes only on your monthly payments and paying interest similar to what you would pay on a loan. You choose an allowance based on 16,000 to 24,000 kilometres of driving.

At the end of the lease term, you may either return the vehicle or purchase it for its depreciated resale value which is always spelled out in the lease contract. If you have driven the vehicle more than the allowable kilometres, and you hadn’t purchased extra kilometres upfront at a reduced rate beforehand, you will pay additional charges as specified in the lease contract.


Leasing Tip: Residual Value

Check the residual value of a car before signing a lease agreement. The residual value is what the car is worth at the end of your lease. The value is based on a percentage of the MSRP Manufacturer’s Suggested Retail Price, as set by the leasing company, not the dealer. The value has a big impact on your monthly lease payments, and may affect your choice of vehicle, plus whether you choose to buy the car at the end of your lease.

Here is how you calculate residual value and lease end value.

  1. Confirm your car’s MSRP on the automaker’s website.
  2. Request the residual value percentage rate from your leasing company – usually between 45% and 60% but can be lower or higher. The lower the percentage, the lower your monthly lease payments and the higher the residual value of your car at the end of the lease.
  3. Calculate (MSRP) x (Residual Value %) = LEV Lease End Value
    Example: $35,000 MSRP x 58% = $20,300 LEV residual value (the price you pay if you decide to buy the car at the end of your lease)

Top Tip: Higher Residual = Lower Monthly Lease Payments

Example: A $30,000 MSRP vehicle leased for 36 months with a residual value of $14,000, means you pay only $16,000 over three years. If the residual is $20,000, you pay only $10,000 over three years. You have lower monthly lease payments.*

* Offers, incentives, interest rates and taxes not factored into example.


So, now the question is which is better, leasing or financing? Well, that depends on what is important to you. Besides financial considerations, we all have different lifestyles and priorities to consider. We hope our ultimate side-by-side checklist helps your decision.

To summarize, leasing does not typically build equity with its lower monthly payments, while financing does. The reason equity is built for financing is because a portion of the higher monthly payments builds equity. The cost of financing one vehicle and driving it for ten or more years is definitely less expensive than leasing several vehicles over the same period. However, when your primary consideration isn’t financial, then other variables like the ones in our checklist will play a significant role in your decision-making process.

Good luck and happy decision-making.


Posted by OpenRoad Auto Group

At OpenRoad Auto Group, we are proud to represent 21 (and growing) stellar brands of new cars for sale in Greater Vancouver and hundreds of used cars in Vancouver for sale at over 26 full-service car dealerships. Exclusive to OpenRoad Auto Group, our Club OpenRoad loyalty program allows you to gain points while you service your vehicle, and redeem these points on your next vehicle purchase. Exclusive events and perks are also great incentives to join Club OpenRoad.