Should You Lease or Finance Your Next Vehicle?

If you're shopping for a new set of wheels in Canada, one of the biggest questions you'll face is: should you lease or finance? Both options have pros and cons—and depending on your lifestyle, credit score, and budget, one might fit better than the other.

In this guide, we’ll break down the difference between leasing and financing, look at how factors like vehicle loan approval, used car loan rates, and your credit score play into it, and help you decide which route to take.

What’s the Difference Between Leasing and Financing?

Leasing

Leasing is like renting a car for a few years. You make monthly payments to drive the car, but you don’t actually own it. At the end of the lease term (usually 2–4 years), you return the vehicle or buy it out.

Pros of Leasing:

• Lower monthly payments

• Drive a newer vehicle more often

• Limited long-term commitment

• Often includes warranty coverage

Cons of Leasing:

• Mileage limits and wear-and-tear fees

• No ownership—you're paying for use, not value

• Buyout costs can be high

• Harder to lease with bad or no credit

Financing

When you finance, you’re buying the car with the help of a loan. You own the vehicle once the loan is paid off.

Pros of Financing:

• You own the car at the end

• No mileage restrictions

• You can sell or trade the car at any time

• Builds equity over time

Cons of Financing:

• Higher monthly payments (usually)

• Responsible for repairs once the warranty expires

• Interest adds to the total cost unless you score great used car loan rates

What Role Does Credit Play?

Whether you’re leasing or financing, your credit score matters. A lot.

For leases, lenders typically want good to excellent credit—usually above 700. Why? Because leases involve strict terms, and they want to work with low-risk borrowers.

If you’re planning to finance, you’ll have more flexibility—even if your score is lower. Many Canadians qualify for vehicle loan approval with a score in the mid-600s or even lower, especially through specialized lenders.

So, what’s the minimum credit score for a car loan in Canada? There’s no universal number, but generally:

• 660+ = Easier approval, lower rates

• 600–659 = Approval possible, slightly higher rates

• Below 600 = You’ll likely need a bad credit lender, but it’s still doable

Online tools like AutoPlug make it easy to apply for a car loan online, even if your score is under 600.

When Leasing Makes More Sense

Leasing might be the better choice if you:

• Prefer driving new cars every few years

• Want lower monthly payments

• Don’t drive a ton of miles annually

• Have excellent credit and qualify for special lease rates

Just remember: leases come with strict mileage and condition rules, and they don’t build equity.

When Financing Is the Smarter Option

Financing is often the better fit if you:

• Want to own the vehicle long-term

• Drive a lot and don’t want mileage limits

• Want the freedom to sell, trade, or modify the car

• Need more flexibility with credit or loan terms

And if you find competitive auto finance Canada options—or you're working with lenders offering favorable used car loan rates—you could save significantly compared to leasing.

Platforms like AutoPlug also let you apply for a car loan online and shop lenders before stepping into a dealership. That means no pressure and a better chance to get the right deal.

Quick Tip: Use a Loan Calculator Before You Decide

Still not sure which option is right for you? Use a payment calculator to compare scenarios. Plug in the lease terms vs. a loan with interest using an online car loan calculator and see how the monthly and total costs stack up.

Final Thoughts

Leasing and financing both have their place—it really depends on your needs, habits, and financial situation. If you like flexibility, long-term savings, and building equity, financing may be your best bet. If you want lower monthly payments and to drive a new car every few years, leasing might be the way to go.

If you're in BC or anywhere in Canada, AutoPlug can help you explore both options—whether you're working with top-tier credit or need a bad credit path forward.

Ready to see what you qualify for? Apply for a car loan online today and take the guesswork out of your next move.