Why Are Millennials Choosing to Finance over Leasing Cars?
Some of life’s most stressful moments for millennials in Ontario involve finances.
Think about everything that revolves around it; your rent/mortgage, retirement, your kids and their future, your parents, and of course, your sweet ride.
Cars play a vital role in the day-to-day operations of modern society, and especially for the generation of thrill-seeking, travel-loving millennials. There are three tried and tested ways to purchase a vehicle:
- The all-cash method
- Leasing a car in Ontario
- Getting a Car Loan in Ontario
We’ve chosen to not go into depth on the all-cash method as it’s not applicable to many lifestyles and financial situations. Basically, it’s expensive in the short-run and there are few millennials that budget to spend huge quantities (in the tens of thousands of dollars!) all at once.
So, let’s get into two of the more realistic options for Millennials in Ontario.
The Difference between Leasing and Financing
If you’ve ever chatted about the car world with friends, you may have either heard “lease your vehicle”, or “financing is the way to go!. It can be confusing to hear so many contrasting ideas, but we’ve analyzed both sides of the debate for your benefit.
Who actually owns the vehicle?
- Lease: You don’t own the car. Instead, you pay to use it for a period of time that was agreed upon between you and the dealer. Once your borrowing term has ended, you have a few options. You can either walk away and return it, turn it in for another vehicle, or you can just buy the vehicle.
- Finance: If you choose to get a car loan in Ontario, you are officially the owner of the vehicle and it’s yours for the keeping (as long as you make your payments on time). Considering that you own it, there are no limitations for how or where you use the car, or whether you’re “allowed” to add custom features.
How much will I pay?
- Lease: This is dependent on a predetermined agreement between dealership and the buyer, however, it is usually includes the first month’s payment, a security deposit that is refundable, your down payment, taxes, registration fees, and depending on which dealership you’re with, additional fees.
- Finance: Financing is sometimes quite simple, what is included is usually the cash price or a down payment, standard taxes,interest, registration fees, and potentially other fees. The upside on getting a car loan in Ontario is that you can always refinance your car to better suit your budget.
Hey, what if I want to end my payments earlier than planned?
- Lease: Leasing does offer an “early termination fee” but don’t get too excited– it’s unfortunately just as costly as sticking with the rest of the lease’s term.
- Finance: There are few options when it comes to terminating your vehicle’s financing, which includes selling or trading the vehicle.
I’m concerned about Depreciation!
- Lease: If you choose to lease, you don’t have to worry about the future value of the car. Since the car is not under your ownership, simply because that is not your concern as the leaser, but on the flip side, you do not get any equity from the car.
- Finance: As you know, a car is a depreciating asset and naturally the vehicle will depreciate in value. However, one big plus of getting a car loan in Ontario is that the equity is yours and you can do whatever you please.
Is there a limit on the miles I put on a car?
- Lease: With most leases, you have to go through the process of negotiating with your dealership on how many months and miles you can drive the vehicle. If you go above, you may experience repercussions from them.
- Finance: On the flip side, you can drive as often and as far as you want, but the trade off is that the value of the vehicle will decline as your miles increase.
There’s no doubt that getting a car through leasing or financing involves a considerable amount of analysis on many factors, and while leasing cars seem to be the glamorous route, financing cars offers a realistic approach that allows the buyer a bit more freedom in how the car is used.
Buying a car through financing seems to be the better option for many millennials on a multitude of levels. Some of the benefits include:
Pay less over the long term
Always look at the long term, the big picture. Leasing may look good and while the monthly payments are lower than financing, there is a significant trade off. Each car loan payment in Ontario builds up equity, which is crucial for selling or trading your vehicle in the future. As a car owner, having that flexibility offers a sense of reassurance- you’re never locked into a fixed ownership period like one would be with a car lease.
Have control over where you go
Leasing offers little autonomy over how and where you travel, and that can be annoying for the adventurous millennial. Having a fixed mileage forces you to constantly be weary of how much you drive, and that’s certainly not fun. Additionally, if you were to accidentally go over your allocated mileage, you’d have to face significant fines. To fully enjoy your vehicle without worrying about external forces dictating your every move (or drive), your best bet is to finance your car.
Ultimately, millennials these days face two options when it comes getting a car: leasing, or getting a car loan in Ontario. Financing offers flexibility, and that stems to having options for every form of financial situation. No matter how you’re leaning, it’s important to weigh your options and make the best decision for you.
If you’re looking to get a car loan in Ontario, contact Auto Loans Canada, where we make the decision-making process easy.