As you may have noticed, there are all kinds of shortages in Canada right now. This is due to a multitude of reasons, including chaos in global shipping, a shortage of computer chips, a lack of workers (amplified by COVID-19) and a big increase in demand. This has meant that many consumers have either postponed purchasing certain products or pivoted to what’s available—and the latter has certainly applied to the topic of today’s blog: buying or leasing a car.
Things to consider
Regardless of the state of the pandemic at the moment, there are things for you to consider as you decide which car option is best for you. Here are a few:
1. What is your budget?
It is easy to get distracted by the latest shiny car with all the new tech. Who doesn’t want a sleek, fast car that parks itself? Or a practical SUV with heated seats and on-demand movies playing in the back seat? But realistically, how much can you afford to spend on a vehicle? There is the “10-20 rule” to consider and that is, spend 10% of your take-home income or 20% of your gross income—but that does not tell the whole picture. If your new vehicle will cost a fortune in insurance and maintenance, well, the 10-20 rule does not really help. It’s not the take-home money that matters in this case, it’s what you have leftover after ALL your expenses, from rent to groceries–and none of that is cheap nowadays. Be realistic. The cost of goods in 2022 may not be the same as they were in 2021.
2. What will you be using the car for?
If you have a big family and need a larger car or SUV, your choice of vehicle will of course be different than if you are a student looking for a ride to school. So assess what your actual needs are and that will lead you to the best model and size for you.
3. Electric or gas?
If you’re tired of pumping gas into your car and/or want to make our planet a better place, consider electric, especially if you are in a house with easy access to an outlet. There are many great models available at different price points.
Buy or lease?
Ok, so you have carefully gone through the considerations above and now you’re ready to decide. Let’s look at some of the advantages and disadvantages of buying and leasing.
1. Buying
When you purchase a vehicle, you often wind up with higher monthly payments than if you lease, for example, but in the end, you will own the vehicle and that has value. However, because of the pandemic and the shortages mentioned earlier, many car dealerships do not have tons of stock available. And this can affect your decision. Fewer cars for sale can mean:
- The model you’ve had your eye on is not available, either because it has not arrived on the lot or because people anticipating the shortage are buying them in advance.
- The price may be higher because the demand outweighs the supply. In fact, Kelley Blue Book in the United States reports that November 2021 had the highest average new care prices in history.
- Because of the price may be higher, it can be harder to get a loan. You may not have counted on inflated car prices.
So if you are not in a rush, not overly picky as to colour and other features, buying may be a good option for you as long as you wait for the right price and can qualify for the loan.
2. Leasing
Although you don’t own the car in the end (unless buying it is an option in your lease), there are still many advantages to leasing. Some of these include:
- You are never stuck with an older model car. Leasing means you can always drive a new or newish model, with all the bells and whistles. This matters if you love tech in your car. And safety. Because those features are updated often.
- Lower monthly cost. You can opt for a longer-term with a lower fee.
- Leasing a new or newish car means you are likely always under the manufacturer’s warranty.
- Some people have avoided leasing in the past because they didn’t want their mileage limited. However, with many of us working from home these days, this may no longer be a barrier to enjoying your car.
- There can be tax advantages for businesses to leasing.
However, there are negatives to leasing as well: It can cost you more to lease than to buy, although with the current shortages, perhaps not at this moment. You have to keep the car in relatively good condition or risk paying more when you return it.
The takeaway
As you can see, there are pros and cons to both options, not to mention the ever-changing effects of the pandemic on the industry. Get in touch with the LegalShield lawyers and we can go over any offer of sale or lease for your car. We can even help you negotiate the best terms. Become a member. Ask us questions! Join the more than 4,400,000 people already protected by LegalShield and sign up today.
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