Curious about used vehicle leasing? You’ve come to the right place. First things first, can you even lease a used car in Canada? Yes, you can! It’s a little less common than leasing a new one, but some dealers do offer this more cost-effective option. Leasing a used vehicle is strikingly similar to leasing a new one, both give you temporary ownership of a car for a set amount of time and money.
How to lease a used car
Wondering if you can lease a used car in Canada? Read on to find out everything else you need to know, including lease requirements, how to set a budget, the different types of leasing, how to calculate lease payments, where to shop, how to negotiate a used car lease and more.
Here are the steps to take when leasing a used car:
- Understand leasing requirements
- Decide on a budget
- Shop for a car at a dealership
- Negotiate the lease
- Calculate car lease payment
- Finalize the lease
What are the requirements to lease a used car?
Start with understanding your credit score, as it will be considered when applying for a used car lease, (a score of at least 700 is ideal). You can check yours at Equifax Canada or TransUnion Canada – both are safe and trusted sources. It’s also a good idea to have a lease term length in mind. They usually run from 2-5 years, and the longer your term the lower your payments, (though you’ll end up paying more in interest with a longer term). Also be aware of the distance and other restrictions. Most cap at around 20-24,000 km/year, so if you need to drive more than that, used car leasing may not be the way to go.
How do you set a lease budget?
When setting a budget, it’s really important not to overlook the additional costs that come with leasing a used vehicle. Things like gas, maintenance and registration fees should be factored into your overall budget so there are no unwelcome surprises. To make life a whole lot easier for you, our friends at CAA have created this Driving Costs Calculator to help you figure it all out once you have a vehicle in mind.
How do I shop for a car?
To get an idea of the types of vehicles available within your budget, start by looking online first. Check out dealership websites near you or visit online listing sites like autoTRADER.ca and Kijiji Autos to compare vehicles and pricing. If you think you’ll need more assistance, head to a dealership in person and speak to a sales representative. Once you find your dream car, be sure to get a thorough pre-purchase inspection, take it for a test drive and get the full vehicle history report.
How do I negotiate a used car lease?
Remember, knowledge is power. If you go in with some research under your belt you’re already ahead of the game. Start by getting an idea of what similar vehicles have sold for in your area so you have a good understanding of the car’s worth. Other things like vehicle colour, number of previous owners, warranties, after-market features, new/older brakes can also be used when negotiating a fair price, so be sure to keep them in mind. Our negotiation guide can help!
How should I calculate lease payments?
Ladies and gentlemen, start your calculators! There are a number of factors that will determine your monthly payment, like how much you’re putting for the down payment (if anything), the value of your old car if you’re trading in, the length of your lease term, the interest rate and finally, the taxes. Work with your dealer to figure out what your monthly lease payments will be taking all of these factors into consideration.
How do I finalize a lease?
Ok, so you found “the” vehicle. You tested it out, finished the inspections and you’re ready to close the deal. Now all you have to do before you drive off into the sunset is cross the t’s and dot the i’s. Sign your lease agreements and proof of purchase, complete your registration information, including plates, and follow your province’s regulations for finalizing a sale, (remember, each province has its own!).
Different types of leasing
Standard leasing
This is basically a straight up lease through a dealership. You can get a short-term car lease of 2-3 years or one as long as 5 years – just keep in mind, the length of time you choose will affect the amount of your monthly payments, as well as the interest.
Lease to own
Once your lease is up you can choose to either return the vehicle or purchase it outright – this is called a lease buyout or leasing to own. In order to buy it out, you have to determine the residual value, which is the amount the car is worth once your contract is up. This is also the amount you will end up paying if you decide to take the plunge.
Lease takeovers
In the event that a leasee wants to get out of their contract early, they would seek out a lease takeover. This can be a great opportunity if you’re looking to drive a vehicle for a short amount of time or if you just want to dip your toe into the car leasing pool. To find out more about how lease takeovers work on either end, visit leasebusters.com.
Used Car Leasing FAQs
What is the difference between leasing and financing a car?
The fundamental point of difference between leasing and financing is ownership. At the end of your leasing period, you typically give the car back (unless you lease to own as mentioned above), whereas when you finance a car, you are making payments towards eventual ownership of the vehicle.
What are the pros and cons of leasing a used vehicle?
Compared to leasing a new car, the biggest advantage to leasing used is lower monthly payments. It’s also a great option if you have a lower credit score, as lenders will be more likely to approve a loan for a car that’s depreciated in value versus a new one. The downside to used car leasing is that there’s no equity. You don’t own the car in the end so you’re basically starting from scratch once your lease is up. You could also end up paying penalties if you go over the kilometre limit. Used car leases are also less common so there may not be as much availability and selection to choose from.
At the end of the day, when it comes to used car leasing, the most important thing is to know your stuff. Do the research ahead of time, understand the costs, know your budget and talk to the right people who can help guide you in the right direction. Good luck!