Buyer’s Guide: How to Buy, Finance, or Lease a Car in Canada

1. How to Choose the Right Car in Canada

• There is no single “best car” or “best brand.” Every automaker has reliable models.

• Focus on what fits your lifestyle, budget, and driving needs.

• Always test drive cars to check comfort, visibility, and practicality.

• Buy or lease only what you can afford with confidence.

2. What is the Real Price of a Car? (Out-the-Door Price)

The car price you see online often does not include all fees.

• Extra costs may include dealer admin fees, freight, PDI, and taxes.

• Promotions like “as low as 0%” or “$79/month” don’t always reflect real terms.

• Always ask for an out-the-door quote from the dealership.

3. Tax Savings with a Trade-In in Canada

Trading in your vehicle can reduce the sales tax you pay.

Key rules:

• Tax applies only to the balance after trade-in.

• Does not lower your tax bracket.

• Only applies if you own the car (cash or finance).

• Leases don’t qualify — you pay tax as you go.

• Lease residual values are before tax (e.g., $25,000 residual = $25,000 + buyout fee + tax).

4. Financing a Car in Canada

Car financing in Canada is available through manufacturers, banks, or dealerships.

• Shorter loan terms → higher payments, less interest.

• Longer loan terms → lower payments, more interest overall.

Example:

• 24 months @ 0% → Higher monthly payments, no interest.

• 84 months @ 5% → Lower monthly payments, more interest.

Caption: “Shorter term = higher payments, less interest. Longer term = lower payments, more interest.”

5. Leasing a Car in Canada

Leasing is another option if you want lower monthly payments and like driving newer cars more often.

• Payments are based on: interest rate, residual value, mileage, down payment, and security deposit.

• Mileage limits apply — exceeding them means penalties.

• At lease end, you can return, buy out, or upgrade.

• Early lease return/trade-in: vehicle must be appraised at current market value; penalties may apply.

There are two main types of security deposits in car leasing:

1. Approval Support

   • Helps applicants with limited or poor credit history (e.g., newcomers to Canada) get approved for a lease.

2. Interest Rate Reduction

   • Some brands allow you to make a refundable security deposit to lower the lease interest rate.

   • Example: If the lease rate is 5%, paying a few thousand dollars upfront could reduce it by 1.5%, saving you money on interest over the term.

 In both cases, the security deposit is refundable when you trade in, return, or buy out the vehicle at lease end.

6. What’s the Difference Between Bi-Weekly and Semi-Monthly Car Payments?

In Canada, car loans can be set up with bi-weekly payments or semi-monthly payments. While the amounts may look similar, the schedule makes a big difference.

• Bi-Weekly Payments → Every 2 weeks (26 payments per year).

• Semi-Monthly Payments → Twice a month (24 payments per year).

This means if the payment amount is the same, bi-weekly works out to two extra payments per year.

Summary:

• Bi-weekly = faster payoff, slightly higher yearly cost.

• Semi-monthly = easier for budgeting, no extra payments.

7. Finance vs Lease: Side-by-Side Comparison

8. Which Cars Hold Their Value in Canada?

• Resale value depends on market conditions, demand, and technology changes.

• A car that holds value today may not tomorrow.

• Focus on what you need and enjoy driving every day.