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Your car options: Lease or buy?
One reason this question is asked so often is that there
is no simple answer. It really depends on your own situation
and what you’re looking for. Here are a few pros and
cons of each you may want to keep in mind.
If you buy . . .
- You own the car and you can keep it for as long
you want – sell it in a year or drive it forever.
- If you’re financing, you’ll likely have
higher monthly payments than if you leased. Of course when
the payments are over, you do own the car.
- You’re free to do whatever you want
to the car – customize it any way you like.
- You don’t have to worry about putting
on high mileage – there are no penalties other than
the resale value when you decide to sell.
If you lease . . .
- You can drive a car that you might not be able to afford
to buy. Your monthly lease payments would be lower than
the payments if you bought it.
- Sometimes you can lease with no or very
little down payment, not really possible when you buy.
- You can’t put high mileage on a leased car
– usually no more than 20,000 kilometers a year –
or it could cost you a fortune in penalties.
- You must maintain the car according to a
very specific contract and you can’t customize it
in any way.
- You shouldn’t have to worry about
any major repairs because the car will still be covered
by the warranty.
- Your payments could be tax deductible if
leasing for business reasons (but if you buy you get tax
deductions through capital cost allowance). Talk to your
tax advisor about which may be best for you.
- If you want to terminate the lease early for any
reason, you will have to pay penalties.
There are many other issues involved in this question, but
space does not permit. If you’d like to get some advice
on leasing or buying for your situation, click
here to find the RBC financial planning professional closest
to you.
Important information about our financial planning services can be found at the bottom of our
homepage.
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