Compare the true total cost of leasing versus buying a vehicle in Canada — including taxes, fees, and residual value.
| Cost Item | Buy | Lease |
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When you buy a vehicle, you are paying for full ownership. You take out a loan (or pay cash), make monthly payments, and at the end of the loan term the car is yours free and clear. You can drive it as long as you like, modify it, and sell it whenever you choose.
When you lease a vehicle, you are essentially renting it for a fixed period — typically 24 to 48 months. Your monthly payments cover the vehicle's depreciation during that time (the difference between its purchase price and its residual value at lease end), plus interest (expressed as a "money factor"). At the end of the lease you return the car, buy it out at the residual value, or lease a new vehicle.
One important Canadian difference: when you buy a vehicle, you pay sales tax on the full purchase price upfront. When you lease, in most provinces you pay tax only on each monthly payment — not the full vehicle value. This can make leasing appear significantly more tax-efficient in high-tax provinces like Ontario (13% HST) and Nova Scotia (15% HST).
However, Quebec is an exception — QST applies to the full capitalized cost of the lease, not just the payments, which reduces this advantage for Quebec residents.
It depends on your situation and priorities. Leasing is better if: you prefer lower monthly payments, you want a new vehicle every 2–3 years, you drive under the mileage limit (typically 20,000 km/year), and you are self-employed (lease payments may be partially tax-deductible). Buying is better if: you plan to keep the vehicle long-term (5+ years), you drive high mileage, you want to build equity, or you want the freedom to modify the vehicle. Over the long run (10+ years), buying and holding is almost always cheaper than continuously leasing — but leasing offers flexibility that many Canadians value.
The money factor is a lease-specific way of expressing the interest rate. To convert a money factor to an annual percentage rate, multiply it by 2,400. For example, a money factor of 0.00350 equals an APR of 8.4% (0.00350 × 2,400). Dealers are not required to disclose the money factor in Canada, so always ask for it explicitly and do this conversion to compare it against current auto loan rates. A money factor below 0.00167 (approximately 4% APR) is generally considered competitive in a normal rate environment.
Most Canadian leases allow 20,000 km per year (some luxury brands offer 24,000 km). If you exceed the limit, you are charged a per-kilometre fee at lease end — typically $0.07 to $0.15 per kilometre over the limit. On a 3-year lease, going 5,000 km over per year at $0.10/km costs $1,500 at return. Before signing a lease, honestly estimate your annual mileage. If you regularly drive more than 20,000 km/year, leasing is likely not the right choice unless you negotiate a higher mileage allowance (which increases the monthly payment).
Yes, but it is typically expensive. Options include: paying the early termination fee (often several thousand dollars), transferring the lease to another person through a lease transfer service (sites like LeaseBusters operate in Canada), or buying out the vehicle at its current value and selling or trading it. The best option depends on how much you owe versus the vehicle's current market value. In some cases, when used car prices are high, trading out of a lease can be done at little cost — ask the dealer for a lease buyout quote and compare it to the vehicle's current market value first.