What is the difference between car leasing and car purchasing?

When you buy a car in Canada, you can opt between purchasing a vehicle outright and leasing it. Car leasing and car purchasing are two different means to own a vehicle. Traditionally, people buy a car through cash or check payments. This way, the car is automatically sold to its new owner, who then assumes the full responsibilities and rights to use the vehicle. The buyer pays for the full retail price of the car. He could also buy a vehicle through financing deals or car loans, which are offered and provided by banks and car financing institutions. The arrangement is that the financer or lender pays for the entire amount of the car. The buyer will then pay on installment basis the amount of the purchase plus corresponding interest. At the end of the loan term, the buyer should have fully paid all payables due to the financing firm or bank in exchange for the full and rightful ownership of the vehicle.

Car leasing is an entirely different process. This way, the buyer leases a car from a vehicle leasing company for a few years. Within that period, the lessee will own the car as if it is his own. He will also regularly pay an agreed upon amount as lease payments until the end of the contract. At the expiration of the agreement, the lessee will have to return the car to the leasing firm. It is his option, then, whether he will lease again or buy a car of different model or brand. Many people prefer car leasing because doing so could save them a hefty amount. The monthly payment for a lease is also much lower when compared to a monthly payments when buying the same vehicle with a car loan.

Car leasing is becoming more popular particularly in Canada because many consumers are getting uncomfortable tying up their money in buying a vehicle. If you decide to lease a car, you will be paying for the depreciation amount of a vehicle during the lease time. Depreciation is the difference between the original value of the new vehicle and its actual value at the end of the leasing period. This makes leasing a car a very practical option when buying a vehicle. Leasing also provides the opportunity to own and drive a new car more often. However, there is an annual mileage limit for car leases, whereas you could drive all miles you want if you bought a car outright.