What should I do if my lease is ending?<\/h4>
If your lease is ending this year, consider these options to help save money:<\/p>
- Extend your lease. <\/b>If you aren\u2019t sure about leasing or buying, you may be able to extend your lease up to a year to have more time to research your options.<\/li>
- Buy your car. <\/b>Most lease contracts have a buy-out clause. If you\u2019ve fallen in love with your car, it may be less expensive to commit to it.<\/li>
- Shop preowned. <\/b>Manufacturers offer great deals on certified preowned (CPO) vehicles. You\u2019ll avoid the sticker-shock of buying new, while still getting a well-maintained car \u2014 usually a former lease.<\/li><\/ul>
You can browse more options in our guide to the lease-end process<\/a>.<\/p><\/div><\/article>
Leasing a car in Canada: 6 steps<\/h3>
Step 1: Pick a lease setup<\/h4>
Like car loans, leases aren\u2019t one size fits all. While different dealerships might have their own special programs, most leases typically fall into 2 categories:<\/p>
- Closed-end lease. <\/b>The most common for individuals, closed-end leases typically allow you to return your car at lease end without worrying about the difference between the residual value of the car and its actual value. You also usually have the option to purchase the vehicle or extend the lease.<\/li>
- Open-end lease. <\/b>More common for businesses, an open-end lease puts all the responsibility on the lessee. This means you\u2019ll have to pay the difference between the car\u2019s residual value and its actual value at the end of your lease. So if your car isn\u2019t worth as much as the dealership estimated at the beginning of your lease agreement, you may owe money \u2014 in addition to other closing fees.<\/li><\/ul>
Step 2: Create a budget<\/h4>
Figure out how much you can afford to pay monthly for your lease. Add up your mortgage or rent payment, utilities and other recurring monthly expenses and subtract that from your monthly income after taxes. This will give you an idea of how much money you have left over each month to put toward your lease payments. Don\u2019t allocate all of that leftover cash for your lease, though. You should still have a safety net to use in case any emergency expenses pop up during the year.<\/p>
On top of thinking about your monthly lease payments, you\u2019ll also want to save up for some of the other costs that come with a lease. While these usually vary by dealership, they might include:<\/p>
- Down payment<\/li>
- First month\u2019s payment<\/li>
- Security deposit<\/li>
- Acquisition fee<\/li>
- Disposition or buyout fee<\/li>
- Documentation, title and licensing fees<\/li>
- Sales tax<\/li><\/ul>
Keeping these costs in mind when you begin shopping can help you find a make and model that fits your budget. The Canadian Automobile Association (CAA) has a good tool<\/a> for estimating the cost of your vehicle beyond the purchase price. You might also want to contact your insurance company once you have an idea of the car you plan on leasing \u2014 it could impact your current premiums.<\/p>
What you\u2019ll pay beyond a car\u2019s sticker price<\/a><\/p>
Step 3: Research and compare cars online<\/h4>
If you don\u2019t already know what kind of car you want, take the time to carefully research what\u2019s out there. You might want to pay special attention to cars that have a strong residual value \u2014 dealerships usually charge less for these vehicles since they\u2019ll be worth more at the end of your lease agreement.<\/p>
Use resources like the Canadian Black Book, autoTrader.ca and CARFAX Canada to see how much you might expect to pay for a lease for certain makes and models. You may also want to check deals offered by the manufacturer and local dealerships. Some might have special leasing offers that come with low APRs or don\u2019t require cash down at signing depending on the model.<\/p>
Some dealerships may even have used cars available for lease<\/a>, so see if any of these fit your style before settling on the latest and greatest model.<\/p>
Step 4: Request quotes from multiple dealerships<\/h4>
Contact multiple dealerships to gather quotes, keeping these 3 numbers in mind:<\/p>
- Lease term: <\/b>Usually 24 or 48 months<\/li>
- Drive-off fees: <\/b>Vary by location but can range from several hundred to several thousand dollars<\/li>
- Mileage: <\/b>Usually 10,000 to 20,000 km per year<\/li><\/ul>
Ask what your monthly payment would be for your chosen term and mileage limit, noting the potential APR and the car\u2019s estimated residual value as well. You\u2019ll also want to ask about your lease-end options<\/a>, especially if you think you might want to purchase the car when your agreement is up.<\/p>
For example, you might tell the salesperson that you want to lease a 2020 Toyota RAV4 for 3 years, expect to drive around 12,000 km per year, don\u2019t want to pay more than $1,500 in drive-off fees and want the option to purchase the vehicle at the end of your lease.<\/p>
Step 5: Pick the best lease deal<\/h4>
Once you have quotes from a few dealerships, choose the one that gives you the most bang for your buck. This might include a cashback bonus, a low APR or a small down payment \u2014 whatever setup benefits you most. In fact, some dealerships will even adjust your offer based on other dealerships, so don\u2019t be afraid to try out your negotiation skills<\/a> and leverage your dealership with offers from other sellers.<\/p>
Step 6: Finalize your lease<\/h4>
If you\u2019re happy with your lease terms, it\u2019s time to sign the paperwork. Most dealerships also require you to provide proof of insurance at this time. After the last documents are signed, the car will be yours for the next few years. Just be sure to keep up with maintenance and track your mileage to avoid extra fees at the end of your lease.<\/p>
How to get a good deal on a lease<\/h3>
Here are a few tips to keep in mind to help you find a lease that benefits you the most.<\/p>
1. Pick a car that maintains its value<\/h4>
While you\u2019re on the hook for interest, taxes and fees when you lease a car, you\u2019re also responsible for depreciation for the years you drive it. Over a 3-year period, the value of a vehicle tends to go down by 40-50%. The better your car holds its value, the lower your lease payments will likely be.<\/p>
Online resources like the Canadian Black Book and ALG publish annual lists of car models that keep the most value. According to ALG\u2019s 2019 Residual Value Awards, some of the vehicles in Canada that retain the most value over a 3-year period are the:<\/p>
- Subaru Impreza (Compact Car)<\/li>
- Chevrolet Bolt EV (Electric)<\/li>
- Honda Accord (Midsize)<\/li>
- Toyota Avalon (Fullsize)<\/li>
- Mercedes-Benz S Class (Premium Executive)<\/li><\/ul><\/div>
- Subaru WRX (Sportscar)<\/li>
- Subaru Outback (Midsize Utility 2nd Row Seating)<\/li>
- Jeep Wrangler (Off-Road Utility)<\/li>
- Honda CRV (Compact Utility)<\/li>
- Toyota Sequoia (Fullsize Utility)<\/li><\/ul><\/div>
- Toyota Tacoma (Midsize Pickup)<\/li>
- Toyota Tundra (Fullsize Pickup)<\/li>
- Honda Odyssey (Minivan)<\/li><\/ul><\/div><\/div>
2. Understand the car\u2019s price<\/h4>
Once you\u2019ve found a car you\u2019re interested in leasing, research prices before you visit a dealership. Models come with different options and features, so view average sales prices from sources like autoTrader.ca, the Canadian Black Book and CARFAX Canada to keep yourself informed. Keep an eye on the invoice price \u2014 the price the dealership paid for the car \u2014 and any other rebates that might apply so you can negotiate more easily. This is often the lowest price you could possibly pay and can help you during negotiations. Sites like Unhaggle and CarCostCanada can help you research the lowest possible price and even point you to dealerships offering the type of car you want.<\/p>
3. Check manufacturer leasing specials<\/h4>
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Manufacturers often offer leasing specials to help create more demand for a specific model. Many focus on getting the monthly payment low \u2014 usually by reducing the interest rate \u2014 or requiring a minimal down payment. When browsing deals, pay attention to how much you\u2019ll have to put down, signing fees you might have to pay and how long the lease will last.<\/p>You should also be on the lookout for restrictions like mileage limits and maximum allowable wear and tear \u2013 go beyond these allowances, and you\u2019ll have to pay additional fees. Compare leasing promotions to deals offered by other manufacturers to make sure the incentives will actually benefit you.<\/p>
4. Get quotes from multiple dealerships<\/h4>
Once you know which car has a good resale value and you understand its average price, take some time to request quotes from multiple dealerships. See if dealers have the specific model \u2013 plus any add-on features you want \u2013 in stock, and find out what leasing offers are available.<\/p>
Specify how much you can afford to pay up front, including the down payment and drive-off fees. Then ask what kind of interest rate \u2014 known as the lease factor \u2014 you can expect. You can use our guide to calculating the cost of your lease<\/a> to see how much a lease payment will be based on the car\u2019s price, interest rate and fees.<\/p>
5. Compare leasing offers and prepare to negotiate<\/h4>
Read through the fine print of the different offers you\u2019re considering to understand all the costs involved. A leasing special that offers a lower interest rate but comes with higher fees and a larger down payment may cost you more in the long run than opting for a higher rate with fewer fees and less money up front.<\/p>
After you\u2019ve gathered a few quotes and compared them thoroughly, go for the deal that offers the most bang for your buck. If 2 dealerships offered similar terms, you might be able to use a competitor\u2019s quote as fuel for negotiations. Ask if the dealership can match a competitor\u2019s quote or offer better terms. It might be tedious, but you\u2019ll want to go over every fee involved when selecting your lease terms to ensure you\u2019re getting the best deal available to you.<\/p>
6. Customize your lease to meet your needs<\/h4>
If you\u2019ve found a good leasing offer, be specific when discussing terms with the dealer. Most people choose a 36-month lease with the ability to drive 10,000 km per year, but work with the salesperson to customize it to fit your exact needs. Negotiating a higher mileage limit from the get-go can help you avoid overage fees down the road.<\/p>
- Drive-off fees: <\/b>Vary by location but can range from several hundred to several thousand dollars<\/li>
- Lease term: <\/b>Usually 24 or 48 months<\/li>
- Open-end lease. <\/b>More common for businesses, an open-end lease puts all the responsibility on the lessee. This means you\u2019ll have to pay the difference between the car\u2019s residual value and its actual value at the end of your lease. So if your car isn\u2019t worth as much as the dealership estimated at the beginning of your lease agreement, you may owe money \u2014 in addition to other closing fees.<\/li><\/ul>
- Buy your car. <\/b>Most lease contracts have a buy-out clause. If you\u2019ve fallen in love with your car, it may be less expensive to commit to it.<\/li>