Buying vs Leasing at Country Hills Hyundai
At Country Hills Hyundai, many of our customers ask us whether buying or leasing a new vehicle is the better choice for them. When you decide to buy, you pay the full price of the vehicle and gain complete ownership. Leasing, however, allows you to pay for only a portion of the vehicle's cost for a set period, offering temporary ownership.
If you're currently considering these options, our finance team at Country Hills Hyundai in Calgary is here to assist you. Check out our guide below for more details on both choices, and feel free to call or reach out to us online for additional information.
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What is Vehicle Financing?
Vehicle financing involves taking out an auto loan to purchase a car, allowing you to pay for the vehicle over a set period, typically several years. The interest on these loans is calculated using simple interest rather than compound interest, which accumulates over time.
Most new car loans are around 68 months on average, though 72 months is also common. During this period, monthly payments are made, covering both the loan principal and interest. Auto loans are usually amortized, meaning that early payments mainly go toward paying off the interest, with a smaller portion applied to the principal.
While financing typically results in higher monthly payments compared to leasing, as you’re covering the full price of the car plus interest, once the loan term ends, the car is fully owned by you. This means no more monthly payments. Additionally, owning the car lets you build equity, and a well-maintained car can increase its resale or trade-in value.
What is Vehicle Leasing?
Leasing a car is like renting it for a set period, usually between two to four years. During the lease term, you make monthly payments, allowing you to drive a new model without paying the full purchase price.
Key leasing terms include:
- Lease Term: The length of the lease agreement.
- Down Payment: The upfront payment due at the start of the lease; a larger down payment can reduce monthly payments.
- Security Deposit: A refundable deposit paid at the beginning of the lease to cover potential damages or missed payments, refunded if the car is in good condition when the lease ends.
- Monthly Payment: The amount paid each month, determined by factors such as the vehicle’s price, lease length, and mileage limits.
- Residual Value: The estimated value of the car at the end of the lease. A higher residual value generally results in lower monthly payments, as you're paying for depreciation rather than the full vehicle price.
Monthly Cost Comparison
Leasing is often more affordable upfront, letting you drive a new car every few years without committing to the full purchase price. However, leasing doesn’t allow you to build equity in the car, and you must return it at the end of the lease unless you choose to buy it.
Financing a car results in higher monthly payments since you're paying off the full price of the car and interest. However, once the loan is paid off, the car is yours to keep, modify, or sell. If you plan on keeping the car long-term, financing may be more cost-effective in the long run.
End-of-Term and Early Termination
Most customers choose to buy their vehicle after the loan is paid off, securing full ownership. For those leasing, there are several options at the end of the lease term:
- Return the vehicle
- Purchase the vehicle
- Lease a new vehicle
If you return the car, be ready to pay any end-of-lease charges for excess wear, tear, or mileage. If you decide to buy the car, the buyout price will typically be listed in your lease agreement.
Early termination of a lease usually requires advance notice and can result in significant penalties, which could include a fixed fee or the remaining balance of the lease. These penalties may be sent to collections if unpaid, which could negatively impact your credit score for up to seven years.
Visit Country Hills Hyundai Today
Deciding between buying and leasing a vehicle doesn’t need to be difficult. At CMP Auto in Northeast Calgary, our knowledgeable sales team is ready to help you find the option that best suits your budget and goals. Contact us today or visit us at 1313 36th Street NE to learn more.
Frequently Asked Questions
Does financing a vehicle build credit?
Although your credit score may dip initially, making consistent, timely payments will help improve your credit over time.
Is it better to pay off your car loan early?
Paying off your loan early can save you money on interest and reduce debt faster. If you plan to sell the car before paying off the loan, it may be beneficial to pay off the loan in full if it will take more than two years to finish.
How much of a car lease is tax deductible?
As of January 1, 2025, you can deduct up to $1,100 per month in lease payments, totaling up to $13,200 annually.
What happens if you damage/crash a leased car?
If your leased car is damaged or totaled, you'll still need to make payments until your insurance claim is settled. If the vehicle's value is less than the remaining lease balance, you’ll be responsible for the difference unless you have gap insurance.
What is the minimum lease term?
Lease terms start at a minimum of 24 months, with a maximum of 60 months.
Is it better to put money down when financing a car?
Making a down payment when financing reduces the loan balance, which can provide security for the lender and may help cover the gap between the vehicle's value and the loan amount.