Lease an Electric Car: Is it a Good Idea in Canada?
Lease an Electric Car: Is it a Good Idea in Canada?
Posted on June 2, 2023
Canadians who are thinking about leasing an electric car have some important things they must take into consideration before they can move forward with any firm decisions.
Car leasing has been around for a long time, but it is one of the most misunderstood financial products in the world of auto financing.
Our goal is to shed some light on how leasing works and whether it makes sense for you.
Leasing vs. Renting vs. Owning
One of the biggest misconceptions consumers have is they consider leasing a type of long-term car rental. It can appear like you are renting, but there are some nuances that you must consider.
When you rent an apartment, you pay your monthly rent, and that is pretty much it; at the end of your lease, you can either extend the lease or move to a different place.
Leasing a car comes with a host of unique requirements; one of these requirements is the amount of driving you do with the vehicle.
Once you lease an electric car its status goes from new to used; the perceived value of a used car is based on its overall condition and mileage.
The higher the mileage, the lower the vehicle's value, but with electric cars, the value of a used vehicle is difficult to calculate because the market is very new.
With gas-powered cars, when you sign a lease, at the end of the lease is the projected resale value of the car.
You would need to pay this price if you wanted to buy the vehicle outright; this is a simple number to predict because there are over 100 years of gas-powered car buying that can be leveraged.
Calculating the resale value of an electric car is more challenging; this is a process of trial and error, so if you are leasing a car, the resale value may not be accurate, which could cost you more money in the long run.
You'll Need Good Credit to Lease an Electric Car
It may seem counterintuitive, but you need a higher credit score to qualify for a lease than a car loan.
When you take out a car loan, the lender is not expecting you to return the car, they issued the loan based on the terms of your agreement, so the underwriting of this loan is more flexible.
When you lease a vehicle, the car will be returned, so the lender needs to make sure they only allow the most responsible people to lease their vehicles. Your credit score will need to be in the 600s or low 700s to qualify for a lease.
If you are planning on driving a lot or have average credit, you should buy it outright instead of leasing a vehicle.
This is not a decision you should make on your own; it would be wise to visit your local car dealership and review the available car loan options.
The dealership will help with sourcing for a great car loan and will also let you test drive the full range of EVs available until you find the one you love the most.
We’d love to help you lease an electric car in Canada. Simply fill in the form below and we’ll get back to you ASAP or see our selection of new and used cars at our Brantford dealership.