Leasing vs Buying in Ontario

The leasing vs buying question has a clear answer for most Ontario drivers, but it is not the same answer for everyone. Here is the real math with Ontario-specific tax implications.

The Cost Comparison

For a $40,000 vehicle over 6 years:

Buying (financing at 6.5%): $3,000 down, ~$650/month for 72 months. Total paid: $49,800. After 6 years, you own a vehicle worth roughly $15,000 to $18,000. Net cost: $31,800 to $34,800.

Leasing twice (3-year terms): ~$420/month, $2,000 down per lease. Total paid over 6 years: ~$34,240. After 6 years, you own nothing. Net cost: $34,240.

Over 6 years, buying typically saves $2,000 to $8,000. The advantage grows if you keep the car beyond 6 years, since the loan is paid off but the car keeps running.

Ontario HST Advantage of Leasing

When you buy, you pay 13% HST on the full purchase price upfront. On a $40,000 car, that is $5,200 in tax at signing. When you lease, you pay HST only on the monthly lease payments. Over a 3-year lease with a 50% residual, you pay HST on approximately $20,000 worth of payments instead of $40,000. This saves roughly $1,000 per year in HST compared to buying. However, this advantage disappears if you buy out the lease at the end, because you pay HST on the buyout amount.

When Leasing Makes Sense

• You drive under 20,000 km per year (most leases cap at 20,000 km/year, with excess charges of $0.08 to $0.16/km)
• You want a new vehicle every 3 to 4 years with warranty coverage throughout
• You use the vehicle for business and can deduct lease payments
• You prefer lower monthly payments and do not mind never building equity

When Buying Makes Sense

• You drive over 20,000 km per year — excess mileage charges on leases add up fast
• You plan to keep the vehicle 5+ years
• You want to modify the vehicle (leases restrict modifications)
• You want the lowest total cost of ownership over time

The Third Option: Buying Used

Buying a 3-year-old used vehicle avoids the steepest depreciation (typically 35 to 45% in the first 3 years) while still getting a relatively modern, reliable car. A 3-year-old Toyota Corolla costs $18,000 to $22,000 vs $28,000+ new. Over 6 years of ownership, buying used is almost always the cheapest option. See our reliability guide and buying checklist.

For the full picture of what a car costs in Ontario, see our ownership cost breakdown. For insurance considerations, see our insurance guide.