Should you lease or buy a car in Canada?
Quick summary
A lease is like a long-term rental with generally lower payments, and you do not own the car at the end. A loan ends with a car you own. Which costs less depends on how long you keep it, how far you drive and what it sells for, so put your own quotes into the lease vs buy calculator.
Checked November 2, 2026. Main source: Financial Consumer Agency of Canada: Car financing options. See all 2 sources.
How a lease and a loan differ
The Financial Consumer Agency of Canada describes leasing a car as a long-term rental. You pay for the use of the car over a set term, typically 3 to 5 years, and you do not own it when the lease ends. Dealerships usually arrange leases, and leases usually come with conditions and restrictions.
A car loan is a personal loan for buying the car. When you finish paying it, you own the car and can keep it, sell it or trade it in.
Why it matters: a lease payment covers the part of the car's value you use, not the whole car. That is why payments are generally lower than a loan with the same term, and also why you have no car to sell when the lease ends.
When leasing may make sense
Leasing can fit when most of these are true for you:
- You want a lower monthly payment for a set period. The agency says lease payments are generally lower than a car loan with the same term.
- You are comfortable handing the car back, or choosing at the end between buying it, returning it or leasing a new one. The agency says these options may be available.
- You will stay within the contract's conditions, so you will not owe extra fees. Check the yearly kilometre limit, the per-kilometre fee and the wear rules in your own contract.
- A lease with a warranty for major defects and repair costs matters to you. The agency says some contracts may include one.
Source: Financial Consumer Agency of Canada, Car financing options. Checked November 2, 2026.
When leasing may not make sense
Leasing can cost more or cause trouble when:
- You plan to keep the car for many years. The agency says you may end up paying more overall than if you had bought the car. Payments continue for as long as you lease, and there is no car to sell at the end.
- Your plans may change. The agency says breaking a lease before it ends may be very costly.
- You drive more than the contract allows, or you are hard on the car. The agency says you may owe extra costs such as fees for excessive wear and tear.
- You want to avoid a decision at the end. The price to buy the car at the end of a lease is set by the lessor, according to the federal Vehicle Lease or Loan Calculator page.
Sources: Financial Consumer Agency of Canada, Car financing options; Innovation, Science and Economic Development Canada, Vehicle Lease or Loan Calculator. Checked November 2, 2026.
When buying may make sense
Buying can fit when you plan to keep the car for years, drive many kilometres, or want the freedom to sell it whenever your plans change. The cost of buying is what you pay in total minus what you sell the car for, so a car that holds its value costs less to own than one that does not.
A loan also has downsides. The monthly payment is generally higher than a lease payment on the same term, and if you sell early you still repay what is left on the loan. If your loan is larger than the car is worth, the sale may not cover it.
Why it matters: the question is rarely lease or buy in general. It is how long you will have the car and what it will sell for, and those are your estimates, so test more than one.
A worked example: how the answer changes
These figures are our arithmetic, using example inputs and not market data. The car costs $40,000 before 13% sales tax, with $4,000 down. The lease is 36 months at 4.8% with a 50% residual and 20,000 kilometres a year allowed. The loan is 72 months at 7%, with tax financed. Insurance, maintenance and fuel are left out.
| Scenario | Lease cost | Net cost of buying | Which costs less |
|---|---|---|---|
| Keep it 6 years, sells for $15,000 | $54,312 | $39,574 | Buying, by about $14,738 |
| Keep it 6 years, sells for $8,000 | $54,312 | $46,574 | Buying, by about $7,738 |
| Keep it 3 years, sells for $24,000 | $27,156 | $28,036 | Leasing, by about $880 |
| Keep it 3 years, sells for $20,000 | $27,156 | $32,036 | Leasing, by about $4,880 |
| Keep it 3 years, sells for $24,000, drive 25,000 km a year | $29,406 | $28,036 | Buying, by about $1,370 |
Over six years the lease costs more here because a second lease starts with another down payment and another set of payments. Over three years the two are close, and a lower resale value or extra kilometres can move the answer either way. Buying in the three-year rows includes paying off the roughly $22,749 still owed on the loan when the car is sold.
Questions to ask before you sign
- What is the total I will pay over the whole lease, including the down payment, taxes and every fee?
- How many kilometres a year does the contract allow, and what does each extra kilometre cost?
- What counts as excessive wear and tear, and who decides?
- What does it cost to end the lease early?
- What is the buyout price at the end, and who sets it? The federal calculator page says the lessor sets it.
- Are the licence and registration charges in line with the provincial registry? The same page says dealers sometimes mark them up.
Source: Innovation, Science and Economic Development Canada, Vehicle Lease or Loan Calculator. Checked November 2, 2026.
What the Government of Canada calculator compares
The federal Vehicle Lease or Loan Calculator compares buying with a loan until it is paid off against two consecutive leases, including estimated taxes and interest. It leaves out maintenance and repair costs.
Our calculator adds three things you may want: the car's resale value when you sell, your yearly kilometres against the lease limit, and the balance still owed if you sell before the loan ends.
Where to go next
Questions people ask
Is leasing cheaper than buying a car?
Lease payments are generally lower than a car loan with the same term, according to the Financial Consumer Agency of Canada. The agency also says you may end up paying more overall than if you had bought the car. Which costs less depends on how long you keep the car, the kilometres you drive and what it sells for.
Do I own a car at the end of a lease?
No. The Financial Consumer Agency of Canada says you do not own the car when the lease ends. You may be able to buy it, return it or lease a new one, depending on your contract.
What if I end a lease early?
The Financial Consumer Agency of Canada says breaking a lease before it ends may be very costly. Ask for the exact early-ending cost in writing before you sign.
Can I be charged for wear and tear on a leased car?
The Financial Consumer Agency of Canada says you may have to pay extra costs, such as fees for excessive wear and tear. Ask what counts as excessive before you sign.
Does the lease vs buy calculator include insurance and maintenance?
No. It leaves out insurance, maintenance, fuel, registration and lease-end fees other than extra kilometres. Add those from your own quotes.
Try it with your numbers
Does your province have its own rules?
Sales tax on a vehicle and car insurance costs differ by province. Pick yours to see where to look. We remember your choice on this device only.