The pros and cons of buying versus leasing a new car comes down to your lifestyle and financial priorities

The right choice between buying versus leasing ultimately comes down to which trade-offs best fit your lifestyle and financial priorities. Photo by AFP via Getty Images

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The decision to buy or lease a new vehicle is as much a personal one as it is a financial one, shaped by how you plan to use the car and how you think about money. Both options let you drive off the lot in the same make and model, but under very different circumstances.

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Buying provides ownership and long-term control over a significant investment, while leasing offers more predictable costs and lower monthly payments than a loan would require. The right choice between buying versus leasing ultimately comes down to which trade-offs best fit your lifestyle and financial priorities. With that in mind, here are some practical advantages and disadvantages to consider.

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The advantages and disadvantages of buying

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Buying a new car is about ownership. The decision about whether to keep it, trade it in or sell it is entirely yours. That freedom means you can drive as much as you like, make modifications or customizations to suit your style and, if life takes a turn, simply sell it when the time feels right.

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Over the long run, owning often becomes less expensive because you no longer have a monthly car payment once any loan is repaid. From a budgeting perspective, paying the loan off reduces your overall monthly transportation costs. Ownership entails accepting full responsibility for depreciation, which serves as the trade-off for possessing an asset to offset against seven years of payments.

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But buying a new car or truck has its drawbacks beyond depreciation. If you are financing the vehicle, loan payments are usually higher than lease payments, which means more of your monthly budget is committed. Even during the warranty period, keeping up with the manufacturer’s maintenance schedule can be expensive, and you are on the hook for any major repairs once that coverage ends.

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And if your model is not popular when it comes time to sell, you are the one who takes the loss, sometimes settling for less than you feel the car is worth.

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New vehicles are expensive and to help buyers qualify for financing, depending on the size of the down payment, loan agreements may specify a payout amount at the end of the loan, sometimes referred to as a “balloon payment.” This can leave owners needing another loan to finish paying for their car or facing the choice of giving up the vehicle and starting fresh with a new one.

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The upfront cost can also be higher in certain provinces, where sales taxes or luxury taxes add to the price, and while rebates and incentives can help, they are often limited or time sensitive.

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The advantages and disadvantages of leasing

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Leasing a car is a bit like renting since you are paying to use it for a set period instead of buying it outright. The appeal is lower monthly payments and the chance to drive a new vehicle more often.

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If you like having the latest features, prefer the security of warranty coverage or can take advantage of possible tax deductions through Canada Revenue Agency rules, leasing can be a great fit. Then, when the term is up, you either buy the vehicle for the residual value — possibly with a loan — or simply hand back the keys and move on, without the hassle of negotiating trade-in value or trying to sell the car yourself.