Lease and Finance
What Is the Best Way to Pay for a Vehicle?
It is very likely that financing will be required when purchasing a vehicle, as few people have the ready cash available to pay for their new car or truck. Buying a new or used vehicle is one of the largest and most significant financial decisions you will make, therefore it is important to choose the right financing option to best suit your personal needs.
Learn more below about your various payment options.
There are two main types of vehicle financing: Purchase and Lease financing. Either choice will likely have a cost attached because of associated interest charges. However, taking advantage of low-interest vehicle financing incentives available from the manufacturer allows the flexibility to use your money more productively.
The majority of vehicles purchased in Canada are financed with loans. The total cost of the vehicle is financed over the term of the loan, at which time the buyer owns the vehicle after the last payment is made.
In Canada, leasing accounts for nearly a third of new vehicle sales. Pre-owned vehicles may be eligible for leasing as well. In a lease, the amount financed is based upon the initial cost of the vehicle and the Residual Value (RV). The RV is the amount the vehicle will be worth at the end of the term of the lease, based on an estimate of the lessor (the owner).
Types of Leases
When considering leasing a vehicle, it is important to determine what type of lease is most appropriate. There are two main types of leases: closed-end and open-end.
The Benefits of Financing Through a Dealership
Paying with Cash
Industry statistics show the majority of vehicles sold are financed by a loan or a lease. Bank studies indicate only a very small percentage of vehicle purchasers are true cash buyers. This is not surprising as Statistics Canada reports that the cash savings for the average Canadian family in 2018 was only $852.