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If you decide to buy a new car but don’t have the full amount in cash, the two options are to lease or to make payments to own. You may choose to lease a vehicle for a predetermined period instead of buying. At the end of the term, you may walk away from the car or buy it depending on the lease agreement you have signed. Most leases carry a mileage limit, meaning you may be charged extra if you rack up more mileage than is stipulated. Make sure you ask what kind of penalty you would face if you want to terminate the lease before the lease period is up. A benefit of leasing is if you own your own business or are self-employed, you can claim lease payments as a tax deduction.

If you choose to buy, be aware that interest on a car loan for newcomers can reach high percentages. Many car dealers will offer you a loan as an incentive to purchase one of their cars, but it would be best to shop around (both for a car and financing) before you commit. Also ask what penalty you would face if you were to pay off the loan before the period elapses.

See also: Top negotiation tips for buying your next vehicle

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