The Big Financial Leaps

Planning a large or small purchase? Having trouble figuring out mortgages rates? Planning to get married? Check out these great tips, resources and suggestions for all those big financial leaps in your life.

Buying a Car

After years of riding the bus, walking or biking to school, buying a car is certainly one of the most anticipated events in any students' life. You're probably excited about purchasing your first car - however, it can be a daunting task.  There are all sorts of considerations. Should you lease or buy, should it be new or used, and what are the costs associated with buying a new car?

Let’s explore everything you need to know to get you in an economical and reliable car. With this knowledge, you’ll soon be in the driver’s seat!


What is a Lease?

One of the first things you’ll have to figure out is whether you’ll be leasing or buying.

 A lease is a contract which allows you to use a vehicle over a specified period of time. During this time, you will make lease payments based on the total cost of the car. It is important to note that you do not own the car.

Calculating Lease Payments

Let’s say that new fancy car you’ve been eyeing costs $25,000 and you will be placed on a 3-year lease. By going on this lease you would have monthly payments for 3 years. The value of the car would decrease due to depreciation at the end of those 3 years. Let’s use a 50% depreciation rate for this example. This means the car would be worth $12,500 at the end of the lease (also known as the residual value). To determine the lease payment, you would take the original cost and subtract the residual value. You then divide that amount by the duration of your lease to determine monthly costs.

The Math:
$25,000 (original cost) – $12,500 (residual value) = $12,500

$12,500 / 36 months (3 years) = $347/month

You will also need to take into account interest rate and taxes when calculating your lease payments.

Note that all cars depreciate at a different rate (40%-60% at the end of 3 years is a good estimate) and lease lengths can vary. At the end of your lease, you have the option to buy out the car at its residual value or look for a new car to lease.

Advantages Disadvantages
A leased vehicle is usually covered by a warranty for the duration of the lease. There are yearly kilometre limits to the car and if surpassed, be prepared to face some hefty fees.
You can change vehicles or simply return the car at the end of the contract without thinking about trade-in values, trying to sell or negotiating its value The vehicle must remain in tip-top shape! You’ll be seeing some wear and tear fees if the car isn’t well maintained.
Lower monthly payments than buying a car on a loan. If you’re in a habit of leasing, you’ll always have that monthly payment.
  There are significant penalties if you decide to get out of a lease before the contract is up
  No pride of ownership
  Owning a car is more cost-efficient in the long run

Who should buy and who should lease?

  • If you have the cash or don’t have to worry about qualifying for bank financing, you should buy.
  • Consider leasing if you don’t have the cash to buy up front, and your ability to get a loan is compromised.
  • If you need lower monthly payments, are a low-mileage driver and don’t want to worry about reselling the car leasing is a good option.
  • You can always negotiate some of the terms of your purchase or lease, particularly if the vendor has excess inventory.



If you have decided against leasing, your other option would be to buy a car. If going this route, you will have to decide between buying a new car or a used car. Here’s a quick look at the advantages of both options.

Advantages of Buying New:

  • Warranty: The best warranty package comes with new cars. The warranty will detail everything that is covered and provides worry-free driving for a period of time.
  • Technology: Air conditioning and power locks just don’t cut it anymore. Your new car could come with heated seats, self-parking or rear-view cameras.
  • Environmental: Newer cars tend to have higher fuel efficiency and better emissions standards than older cars.
  • Maintenance: Some new cars come with free scheduled maintenance for a limited time. This could save you a bit of money in the long run.
  • No Negative History: You will be the first to own the vehicle, meaning you never have to question if there has been any accidents or prior history associated with this car’s ownership.

The Advantages of Buying Used:

  • Price: The obvious advantage here is that used cars will be cheaper. You may even be able to look for a nicer model if your budget allows for it
  • Insurance Rates: Used vehicles tend to have cheaper insurance rates
  • No extra fees: If you decide to buy from a private party, you can avoid those hidden fees from dealers
  • Competitive Financing: Both banks and dealerships will offer better rates if you decide to finance a used car. Banks will usually offer the more competitive rate of the two as dealerships often have promos for current year models only
  • Selection: A wider selection of cars means you have more options and this can help you find the right car for your budget and style

Zero Percent Financing Vs Rebates

When buying a new car, you may come across dealerships that offer either 0% car loans or a cash rebate up front. So what’s the better deal? With the financing option, you won’t have to pay any interest for the duration of your auto loan. The cost of the car is simply spread out evenly each month. With the cash rebate, the original cost of the car is cheaper but interest will be accumulating (assuming you don’t buy the car outright of course).

The simple answer is to just do the math. Here is a calculator that can help you choose the best option.


Tips for New Owners

  1. Set a budget: Know exactly what you can and can’t afford. Don’t be tempted by the sales staff and end up with options or features you don’t need.
  2. Monthly Terms: Some carmakers are offering up to 84-month terms but beware- you are tied into the vehicle for seven or eight years and by then your needs may have changed, the car may be in need of costly maintenance and you may still owe more money than the car is worth.
  3. Run a vehicle history report: Get a full history of the car. You’ll receive information about previous accidents, owners and everything in between. You can get a history report at Carproof.
  4. Never sign an “AS IS “contract: Many used car dealers will mix that in with the other paperwork you’ll be asked to sign. As with anything that requires a signature, READ BEFORE YOU SIGN. You should have at least 30 days to make sure the car is in good condition. If you sign an “As Is” statement, once you drive the vehicle off the lot, anything that goes wrong is your problem.
  5. Have your financing in place: Know your credit history! If you have a good credit score you can negotiate lower rates and have your loan approved before you purchase.
  6. The best times to purchase cars are typically in the last 2 weeks of December and between July and October.