Financing is similar to owning a home; you sign into a contract with a bank or other lender and make loan payments to settle the principal (the total amount of the loan, which is divided into monthly instalments during the loan period) and interest (the rate your lender charges you each month). After the loan term is over, the car is yours, and you are free to use it whatever you like!
Contract periods typically range from 4-7 years. A longer term typically entails a cheaper interest rate and monthly payment.
Your possibilities for financing include:
Direct Lending (loan money at a better rate from a bank, credit union, or other lending institution).
Before visiting the dealership's financing department, shop around and compare financing terms and rates to assist you choose the offer that best meets your needs.
Leasing is similar to renting a car in that you pay a set daily amount and, unless you exceed the permitted number of kilometres or damage the fender, you just hand back the keys and leave. Keep in mind, there are certain up-front costs associated with leasing, often a first month's payment, a refundable security deposit, and other fees; however, because you only pay for what you use, monthly payments with leasing may be lower than those associated with financing (but not always). Contract periods typically range from 2-5 years.
Finance if you…
Leasing if you…
Want full ownership of the car
Drive long distances regularly
Don’t have enough cash to buy outright
Want the cheapest monthly payment
Want to change to new car every few years
Only drive short commutes (eg. <20,000km/yr)
Want lower maintenance expenses
Keep your cars in good condition
Don't want to worry about car resale
Can I pay in Cash?
Buying a car outright means exactly what it sounds like, you pay for the vehicle full price using cash, and walk away with a brand new car.