Finance

Loans and Leasing in Canada

Few people have enough budget to buy a new car. Sometimes it is impossible to pay the entire prize immediately. Therefore, instead of breaking one’s back and trying to earn money illegally, it is worth thinking about the only possible choice in this case – a loan that will allow you to buy a brand new car. Borrowing implies a certain payment scheme, as well as a remarkable responsibility. Before you go to a bank or other financial company to get a loan in Canada or check for the options from smarter loans, read this article.

When taking a car loan, you should accept every payment you ought to make to repay a loan. As for terms, usually, the longer the period is, the lower the periodic payments are.

Leasing is a type of contract that means that you will have a car for some time with some restrictions. Leasing also implies shorter terms (say, 2 or 3 years), after which the company sets the value of the car based on its condition, configuration, mileage, and other factors (residual value). Because the amount you borrow is less than with a car loan, monthly payments are much less.

Buying a car in Canada: Why a car loan?

Loaning implies that the payments will eventually end, and you will become the owner of the car. If you pay your loan off fast, there is a good chance to avoid major repairs if the service is done promptly (the average length of productive life of a car in Canada is about 10 years).

Loan providers propose more flexible conditions in case of sudden changes in your life that will make you give up. In contrast, leasing companies usually impose serious penalties for breaking the contract. It is worth remembering the pitfalls of lending. Of course, interest-free loans are very tempting, but sometimes their terms are strictly stipulated (from 6 years and longer). Think about it because such obligations can be another burden. Finally, if you want to modify the car in any way (lift the jeep or put another muffler on a sports car), it is better to take a loan since leasing implies no change in the car’s design.

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Yet, despite all advances in assembly technologies, no model can be considered ideal. Nevertheless, each rule has exceptions: a car that is considered the most reliable can be “dead.” In contrast, a casual car manufacturer with a bad reputation will serve you long and without any problems.

Buying a car in Canada, be aware of the cost of insurance, which can also vary greatly because it depends on many factors. The average value is $168 monthly. The cost of premium gasoline is $1.3 per liter. So be aware of monthly expenses of $200 per month. Moreover, do not forget about parking, which can make at least $60 per month.

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