How does car rental or leasing work?

How does car rental or leasing work?

Renting a car is becoming more and more common. First, it’s easy to see the reason: leasing allows drivers to get into a brand new car for a lower upfront cost than buying. Depending on your needs and preferences, this might be the right choice for you. However, it is important to know all the details as well as the different options available.

What is a car lease? Should I rent or buy a car?

A car lease is a long-term rental agreement that gives you the right to use it for a fixed period, usually two to four years. But you don’t own it. At the end of the contract, you must return the car or buy it.

Leases normally require a down payment, followed by monthly payments, which include interest, taxes, and the expected cost of depreciation of the car.

The decision to rent or buy is up to you, depending on your budget and your needs. Keep reading for more information to guide your choice.

What types of rentals are available in Canada?

Leases in Canada fall into three categories:

standard rental agreement as described above. You will need to pass a credit check, agree to a term of two to four years, offer a low down payment; then, you continue the monthly payments until the end of the lease. Once it is completed, you return the car to the dealer.

lease assignment is exactly what the name implies: another driver transfers their lease to you. Which can cost you less than a regular lease, especially if you’re offered a cash incentive. But we strongly recommend that you examine the car to be certain that it is in good condition and well within the mileage limit.

rental contract with an option to buy or lease modifies the terms so that the lessee’s payments allow him to keep the car at the end of the contract. The approval process tends to be easier than a standard contract, but the cars may be older. This is the most common type of contract in Quebec.

The advantages of renting a car

As mentioned before, the main advantage of a lease or a leasing agreement is that you get a new car for a lower initial price than if you bought it. Since you probably won’t take out a loan for your car, the monthly payments will be lower as well.

If you feel the need to change cars regularly after a few years, you will appreciate leasing. You can then try new versions or even completely different models in series.

Another plus is that you will have relatively less stress in the first few years of driving. A new car is covered by a warranty, and you’ll likely return it before it runs out. Some rentals include regular maintenance in the monthly payments, so there are few additional costs during the term of the contract.

The disadvantages of renting a car

The main disadvantage of leasing is that unless you have an option to buy, you have no residual value at the end of a lease. Over 10 years, leasing multiple cars will cost you more than owning one, even when factoring in wear and tear and repairs.

Another important aspect is the mileage. Many contracts have a strict annual limit, usually around 25,000 km, and exceeding it can cost you dearly.

Similarly, if you want to terminate your contract, you will have to pay the remaining amounts due. Likewise, if you decide to buy the entire contract.

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By Michael Caine

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