In PE, what should I know about leasing vs financing for car loans?

In Prince Edward Island, deciding between leasing and financing a car loan carries distinct financial implications, particularly with the 15% HST and current market conditions. Leasing typically results in lower monthly payments as you're essentially paying for the vehicle's depreciation over the lease term, plus a money factor (interest equivalent). A key PEI nuance is that HST is applied to each monthly lease payment, spreading the tax burden over time rather than requiring it upfront on the full vehicle value. However, leasing includes mileage restrictions, potential wear-and-tear charges, and means you don't build equity towards ownership.

Financing, on the other hand, involves taking a loan to purchase the entire vehicle, leading to higher monthly payments but culminating in full ownership once the loan is repaid. For PEI residents, the 15% HST on the full purchase price is typically rolled into your loan, increasing the total amount financed. While financing builds equity and offers unlimited mileage, you assume the full risk of depreciation and future resale value.

Why this matters: In the 2025 market, with potentially elevated interest rates, both the lease's money factor and loan interest rates will significantly impact your total cost. If you prefer driving a new car every few years, have predictable low mileage, and prioritize lower monthly cash outflow, leasing might be appealing. Conversely, if long-term ownership, building equity, no mileage restrictions, and avoiding end-of-lease fees are paramount, financing is the more suitable path. Your personal driving habits, financial goals, and desire for ownership should ultimately guide your decision.