How Does Car Financing Work in Ontario?

Purchasing a car is one of the more significant investments in life. In general, most people can’t buy a car outright, which is why car financing exists. There are a number of different types of payment plans out there, and they all come with their advantages and disadvantages. This is why if you’re uneducated about this subject, things can get pretty confusing. So, today we’re going to look at a few of the popular car loan payment plans in Ontario to find the best option for you.

Types of Vehicle Loans

In general, there are two types of car loans in Canada that you can get if you need to finance the purchase of a vehicle. These are leasing and financing.

  • Leasing a car means that you’re borrowing a car from a company for a specified period of time. Once the lease is over, you will have the option to either purchase the vehicle or lease a new one.
  • Financing a vehicle requires that you take out a loan to pay for the car’s total value. You will then have to pay off the entire car loan over a period of time with a rate of interest.

How to Lease a Car in Ontario

You can usually lease a car in Ontario by signing a contract with either a leasing company or a dealership. This contract will let you use the vehicle for the duration of the lease. In return, you will give the company or dealership a set monthly payment. Once the lease term has been completed, you have the option to either buy the car or return it can get a new lease.

Even though the vehicle is in your possession, you aren’t the owner. For this reason, leasing a car usually comes with a lot of restrictions. If you break any of these restrictions (such as going over the annual mileage limit), it could lead to you being charged penalty fees. Additionally, despite not being the owner, you’re still responsible for the vehicle’s maintenance and insurance costs.

How to Finance a Car in Ontario

When you finance a vehicle, you’re using money from a lender to pay for the car’s purchase price. You will then be responsible for paying this money back in addition to interest over a predetermined amount of time. Both parties will negotiate the interest rate and length of your loan. These are called loan terms.

Unlike when you lease a car, financing your vehicle means you have complete ownership of the vehicle from day one. There won’t be any restrictions on the usage or customization of the vehicle.

Should You Lease or Finance?

Leasing and financing both have their benefits and downsides. However, it’s essential to understand that everyone has a unique financial situation and will require a different payment scheme. Therefore, you must select the option that’s best in line with your current financial status.

Leasing a car is ideal for people who don’t want to own a car for a long time. Leases tend to be short and only cover a portion of the car’s value. Therefore, you can save money as long as you abide by the restrictions. However, leases generally have a stricter monthly payment scheme.

Financing a vehicle, by contrast, is best for people who need flexibility. In obtaining a car loan from a bank or dealership, you can usually negotiate things like the length of the loan, the interest rate, and the frequency of payments. Additionally, you may have the option to pay the total amount of the loan and end the auto loan early. Ultimately, financing is the way to go if you want to own a car for the long term. It also gives you complete freedom over all decisions related to the vehicle.


You have two options when it comes to financing a car in Ontario. You can either lease the vehicle or get a loan to pay for the vehicle. Leasing means you don’t own the vehicle and have to abide by certain restrictions. However, lease payments are usually lower than loan payments. Financing your car with a loan means you own the vehicle, but you’ll have to pay back the loan plus interest within a specified period of time. Which of these options you choose depends on your financial situation and your plans for using the car.