When it comes to leasing out cars, most people get conflicted about whether it is legal to lease used cars. Many people are comfortable and used to hiring new cars rather than used ones as they are unsure of the legal status. Well, the good news is that you can lease a used car in Canada.
Although leasing a used car isn’t quite as common as hiring a new one, but then, either of the two gives you temporary ownership of a vehicle for a while and at a rate. Let’s take a look at how you can lease a used car in Canada, its pros and cons.
Leasing a Used Car in Canada
Leasing a used car is an alternative for people looking to avoid the high cost of renting a vehicle and the commitment that comes with owning a car.
Hiring a used car might be ideal for you, depending on your financial situation. However, the downside to this option is that it is limited to a small number of car brands and dealerships. Not all dealerships lease out used cars.
Leasing a car, whether used or new, is different from financing a car in the sense that after the agreed period, you will return the vehicle. However, if you’re financing a car, you will eventually get permanent ownership of the car.
Leasing a used car is a more cost-effective way to possess a car for a while.
There are different forms of leasing, such as;
- Standard leasing
This type of lease is the primary and most common type. It is done through a dealership. It runs for short term (2-3 years) or long term (up to 5 years).
- Lease Buyout
With this form of leasing, instead of returning the car after the lease term expires, you purchase it at the residual value – that is, the amount the vehicle is worth after the lease term is up.
- Lease Takeover
If you only need to use a car for a short period, this is great for you. You simply take over the lease contract of someone else who wants to get out of theirs.
Requirements for a Leasing a Used Car in Canada
Leasing a used car comes with the perk of paying a lower monthly fee. You also do not need a credit score to qualify, as your lender will not review your credit report. However, before you can lease a used car in Canada, you need to meet specific requirements. These requirements include:
- Having a good credit score (at least 700)
- A lease term length – usually runs from 2-5 years
- Distance restrictions – usually between 20,000-24,000 km per year
These requirements mean that you must have a good credit score, your lease term must not exceed five years, and you must be willing to drive the distance allowed.
Bear in mind that when choosing a lease duration, a longer lease term means lower payments but higher interest, while a shorter lease term means higher payments but lower interest.
After considering these requirements and ensuring you can comply with them, you will then set a budget.
Budgeting for Leasing a Used Car
In setting your budget, you need to consider every single cost alongside the price of the vehicle itself. These costs include;
- Gas fee
- Maintenance fee
- Registration fee
Once your budget is set, the next thing to do is find a vehicle that works just fine with your budget. You can start your search online by visiting dealership websites. It is essential to compare different cars and their pricing to make the best choice. You can as well go to a dealership in person.
After taking the time to find the right car for yourself, you should ensure a thorough inspection is carried out. You don’t want to lease a vehicle with a lien title – a vehicle purchased through a loan, and the loan hasn’t been fully repaid.
You also don’t want to lease a stolen car. You can request the full history report of the vehicle from the dealership or by checking here. When the inspection is complete, and you can guarantee that the car is risk-free, you can negotiate the lease.
Negotiating a Lease for a Used Car
Negotiation is more straightforward and faster when you know the vehicle you want to lease. When you know the car’s actual worth, you can easily negotiate a fair and reasonable price for the lease.
It would be best if you also determine how much you will pay monthly till the lease expires. The lease term’s length and the interest rate and taxes determine how much your monthly payments will be. Note that you may have to make a down payment.
Once you have determined all payment terms and lease duration, you can finalize the lease by signing the agreements and other necessary documents. To conclude the whole transaction, you will need to complete your registration and follow your provincial or territorial regulations to close a car lease deal.
Pros of Leasing a Used Vehicle
Instead of leasing a new car, you make lesser monthly payments for renting a used car because of vehicles’ depreciating values.
- Quick access to a loan
You can get a loan to lease a used car faster than you will get one to hire a new vehicle if you have a low credit score. Lenders will also consider the depreciating value of cars.
Cons of Leasing a Used Car
- You don’t own the car.
It may seem pointless in the end cause you have to return the car unless you decide to purchase it afterward.
- Driving distance restrictions
If you drive more than the allowed distance, you may be fined.
- Limited vehicle option
As it is less common to leasing new cars, the availability of used vehicles to select from is limited.
Although not as common as leasing new cars, hiring a used car in Canada is cost-effective, and the process is not daunting. If you take the proper steps and make careful decisions, you can be sure to get the best deal for your budget.