Benefits of Leasing
Leasing a vehicle in Canada may offer several advantages when compared to financing or purchasing with cash, including the following:
Newest Technology
Leasing a vehicle allows you to drive a car that features the latest technology and innovations without committing to long-term ownership. Modern vehicles come with advanced systems like cutting-edge infotainment, autonomous driving capabilities, advanced safety features, and high-performance engines.
Frequent Upgrades
Since leases typically last 2-4 years, you’re able to regularly upgrade to the latest model with the newest tech features, keeping you at the forefront of automotive innovation.
Less concern about depreciation
As new technology often drives depreciation, leasing allows you to enjoy the newest features without the financial risk associated with the rapid devaluation of high-tech vehicles. At the end of the lease, you can return the car, if your needs have changed, you can purchase the car, if you love it, or you can lease the same car again for an extended period.
Lower Payments
Compared to a traditional finance contract, you only pay for the portion of the car that you use with a lease. This results in significantly lower payments over the same contract term. With a finance contract you have the option to select a longer term to reduce payments; however, this can impact how quickly you can upgrade to a new vehicle.
Tax Benefits
Leasing a vehicle in Canada offers potential tax advantages, particularly for business owners or those who use their vehicle for business purposes. We recommend that you speak with a tax professional for guidance on potential tax benefits for your situation.
GST/HST Deductions
When leasing a vehicle, businesses can often deduct the GST/HST (Goods and Services Tax/Harmonized Sales Tax) on the lease payments, which can reduce the overall cost of the vehicle.
Business Use Deductions
If you use the car for business, a portion of your lease payments may be deductible as a business expense. The percentage of business use of the vehicle will dictate how much you can claim.
Interest Deductions
Interest on the lease payments may also be deductible for business owners, providing further tax relief.
Lower maintenance and repair costs
Leasing a new vehicle often includes manufacturer’s warranty coverage which can cover the entire lease term.
Comprehensive Maintenance Coverage
Many vehicle leases can include a manufacturer's warranty that covers maintenance costs, including regular servicing, repairs, and even specific part replacements.
Peace of Mind
This eliminates the financial burden of costly repairs or maintenance that can be very expensive for vehicles, as well as the hassle of tracking when certain parts or systems need service.
Residualized Luxury Tax
In Canada, luxury vehicles costing more than $100,000 are subject to higher taxes; however, leasing can help mitigate some of these costs.
Lower Tax Impact Upfront
With leasing, you’re typically only taxed on the monthly payment rather than the entire purchase price of the vehicle. This can be especially advantageous for luxury and exotic cars with high price tags, as the initial luxury tax burden is spread out over the lease term.
Residual Value & Taxes
In some cases, the residual value of the vehicle (the estimated value at the end of the lease) is factored into the calculation of taxes, potentially reducing the upfront taxes you need to pay. This is because you're only paying tax on the portion of the car that you will use during the lease term rather than the full purchase cost.