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OMVIC Blog: Car Buying Tips

Leasing a Car in Ontario: What is a Lease?

Jun 30

Written by: OMVIC Communications
Thursday, June 30, 2016  RssIcon

So you’ve chosen a car. You’ve selected the model, and even the colour you want! One of the next questions to consider is, do you want to purchase or lease?


What Is A Lease?

  • A lease is a long-term car rental
  • When you lease a vehicle you don't actually own it - the car dealership or leasing company owns it and you become the "lessee"
  • Lease agreements are for a specific duration (commonly 36, 48, or 60 months)
  • Leases often provide a lower monthly payment than financing a car (depending on the finance term)
Lease vs buy

 

Two Types of Leases

Closed-End Leases

  • A closed-end lease is the most common
  • If you're the lessee, you can either:
    • Return the vehicle at the end of the lease term; or,
    • Purchase the vehicle for a pre-determined amount (set out in the lease agreement)
  • Generally, you're not required to make additional payments unless:
    • There is physical damage to the vehicle;
    • The kilometers driven exceed what was agreed to in the lease agreement; or,
    • There is excessive wear and tear on the vehicle.
  • Most manufacturer leases are closed-ended
Open-Ended Leases

Also known as a residual obligation lease, this type of lease:

  • Requires that you make scheduled payments
  • Makes you responsible for covering any shortfall between the residual value (original estimated value to purchase the vehicle at the end of the lease) and the actual price the vehicle is sold for at lease-end;
  • Is not as common as closed-end leases;
  • May be potentially riskier for you as a consumer

Lease Payments and End of Term Costs lease keys

Monthly Payments

  • Payments are a condition of lease agreements
  • HST is charged on each payment
  • Generally speaking, the higher the down payment, the lower the bi-weekly or monthly payment

End-of-Lease Costs

At the end of a lease term, if you decide to return the vehicle, additional charges may apply for damage or excess wear and tear. Factors that can contribute to these additional charges include:

  • Rust, scratches, paint chips or stains to the vehicle exterior and interior;
  • Neglected maintenance - oil changes not up to date, check engine light on;
  • Wear on tires and wheels - tread depth;
  • Scratches or cracks to the windshield and lamp lenses;
  • Damaged electrical components;
  • Excess mileage

Important Considerations When Leasing a Car

In Ontario, there is no cooling-off period when purchasing a vehicle from an OMVIC-Registered dealer – all sales are final. Breaking a lease agreement can be very difficult, as well as expensive. So it’s important … before you sign the contract … do your research and determine if leasing is right for you.

For other helpful tips about leasing, check our site:

Don’t Become A Monthly Payment Junkie; Negative Equity

_____________________________________________________________________

About OMVIC

An educated and informed consumer is a protected consumer. Visit OMVIC’s website to learn more about your car-buying rights and when they apply, as well as additional tips on buying a car in Ontario.

visit omvic.ca.




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