Everything you need to know to rent a vehicle in Canada

Leasing, a long-term solution

If you’re going to spend several months or years in Canada and need a car daily, leasing can be a good option. You won’t need to go through the hassle and costs of financing a new car; it essentially allows you to borrow a vehicle for a short-term fixed duration with lower monthly and down payment costs. Residents who like getting a newer model every few years also tend to favour leasing over buying.

Closed-end leases

Closed-end leases (sometimes called “walk-away” leases) allow you to return your vehicle at the end of the lease. You sign a contract for a certain number of months and predicted mileage. At the end of the lease, you will have no responsibilities other than possible payment of excessive damage (outside normal wear and tear) or mileage charges.

Your monthly payment depends on:

• The car value when the lease starts and its depreciated value when it ends
•  The contract length
• The predicted mileage
• Included services (insurance, maintenance, roadside assistance, etc.)

Pros

• Lower monthly payment than when you finance a car (so for the same budget, you could get a better car or more options)
• Same monthly payment (easier to manage your budget)
• Option to get a newer model when the lease ends
• No down payment and more flexible payment options
•  No need to sell a depreciated vehicle at the end of the lease

Cons

• Excess mileage penalty if you go over the limit specified in the contract
• Hefty early termination fees and penalties if you need to get out of the lease before it expires
•  No option to purchase the vehicle at the price of the residual value at the end of the lease

Open-end leases

An open-end lease is an option to consider if you know you will stay in Canada for a while. At the end of the contract (usually 2-5 years), you can purchase the vehicle for the price of the residual value indicated in the agreement or return the vehicle and pay the difference between the residual value and its market value.

Note that you might also be able to sublease a vehicle or take over a lease if mentioned in the contract.

Pros

• You can choose to buy the car at the end of the lease
• Lower monthly payment than when you finance a car (so for the same budget, you could get a better car or more options)
• Same monthly payment (easier to manage your budget)
• Option to get a newer model when the lease ends
• No down payment and more flexible payment options

Cons

• Excess mileage penalty if you go over the limit specified in the contract
• Hefty early termination fees and penalties if you need to get out of the lease before it expires (however, you may be able to sublease)
• In the end, leasing usually costs you more than an equivalent loan
• Long-term solution if you know that you will spend a few years in Canada

Useful links

• To sublease or take over a lease: Canada Auto Leasing, Lease Experts and Lease Busters
• Tips from the Office of Consumer Affairs
• Leasing as a Financing Option for a New Car from CIBC