Lease or Buy an Electric Car in Canada? 

Lease or Buy an Electric Car in Canada? 

As more drivers in Ontario and across the country consider switching to electric cars, an ongoing question comes down to: is it better to lease or buy an electric car? 

This decision goes far beyond simply comparing monthly payments. For many potential EV owners, this decision might be overwhelming, with concerns about battery degradation, technology obsolescence, and resale value.

In this article, we’ll look at the complex financial variations between buying and leasing, as well as the impact of EV subsidies in Canada. These fundamental topics will be addressed in this article and help you in making an informed decision that is consistent with your lifestyle and driving habits. 

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What is the True Cost of EV Ownership in Canada?

When considering an electric vehicle, the conversation often starts with the purchase price, which can appear substantially higher than a comparable internal combustion engine (ICE) vehicle. This initial “sticker shock” is a significant hurdle for many, but it’s only one piece of a much larger financial puzzle. 

While choosing to lease or buy an electric car is a financial decision, understanding each expense is crucial to making a decision that will benefit your budget not only today but also in the future.

For those thinking about lease or buy an electric car in Ontario, the Zero-Emission Vehicles (iZEV) program at point-of-sale rebate is applied directly by the dealership, effectively lowering your purchase price before you even start talking about financing. As of 2024, the iZEV program provides up to $5,000 for new battery-electric, hydrogen fuel cell, and long-range plug-in hybrid vehicles. However, there are crucial MSRP caps to be aware of: the base model of a passenger car must be under $55,000 to qualify, while higher trims of that same model can be eligible up to an MSRP of $65,000. For larger vehicles like SUVs, vans, and pickup trucks, the base model cap is $60,000, with higher trims eligible for up to $70,000. It is important to note that, while some governments provide additional credits, Ontario currently does not have a provincial EV incentive program. This makes the federal iZEV program the primary government contribution to your purchase.

Whether you decide to lease or buy an electric car, both options benefit from the iZEV rebate, as it is applied to the negotiated price of the vehicle, which in turn lowers your monthly lease payments. This is where the financial comparison becomes interesting. A lease payment is calculated based on the vehicle’s depreciation over the lease term (typically 24-48 months), plus interest (the “money factor”). Because the $5,000 rebate reduces the capitalized cost, the total amount of depreciation you’re paying for is smaller, resulting in a more affordable payment. This can often make leasing a much more expensive EV feel as affordable on a monthly basis as buying a cheaper one. 

For example, the monthly payment to lease a $65,000 EV might be surprisingly close to the monthly finance payment for a $60,000 car, giving you access to more technology, range, and premium features for a similar cash flow impact.

Aside from the initial price and monthly payment, we must include the Total Cost of Ownership (TCO). This is where buying an EV shines in the long run. Electricity costs are significantly lower and more stable than gasoline prices in Canada. 

An average Ontario driver traveling 20,000 km annually might save between $2,000 and

3,000 per year on “fuel” alone by charging at home overnight. Maintenance savings are also significant. EVs do not require oil changes, spark plugs, gasoline filters, or exhaust systems. While tires and brakes still need to be serviced, regenerative braking systems in EVs frequently increase the life of brake pads. Over the course of five to ten years of ownership, these savings can total thousands of dollars, balancing the higher initial purchase price. However, one must also consider the cost of installing a Level 2 home charger. When leasing or purchasing an electric vehicle, a complete budget should account for all of these variables to present the full, long-term financial picture.

Lease or Buy an Electric Car in Canada

Navigating Obsolescence and Innovation

The automotive world is experiencing a technological transformation not seen in a century, and electric vehicles are at the epicenter of this change. Unlike the slow, incremental evolution of gasoline cars, EV technology is advancing at a breathtaking pace, similar to the smartphone sector. Battery chemistries are improving, charging speeds are increasing, and software is revealing new capabilities overnight. This rapid innovation poses a unique dilemma for consumers: should I invest in a technology that could be dramatically outperformed in just a few years? This is perhaps the most compelling argument for an electric vehicle lease in Canada, as it offers a powerful shield against technological obsolescence.

Leasing an electric vehicle is essentially a three- to four-year subscription to current technology. When you lease a vehicle, you only pay for its use during the most technologically relevant time period. This lets you to benefit from the most recent advances in battery range, efficiency, and infotainment systems without making a long-term commitment. Consider the advances made in just the last few years: battery ranges have surpassed 400-500 kilometres, 800-volt architectures enable charging from 10% to 80% in less than 20 minutes, and features such as Vehicle-to-Load (V2L) allow your car to power appliances or even your home during an outage. By leasing, you ensure that at the end of your term, you can simply hand over the keys and get into a new car equipped with the next wave of advances, such as the availability of solid-state batteries, faster charging, or more advanced autonomous driving features. You are always on the cutting edge, never experiencing “buyer’s regrets” from being stuck with technology that is no longer relevant.

In contrast, the justification for purchasing an EV in the face of such rapid change is based on the concept of a “mature platform” and the power of Over-the-Air (OTA) software upgrades. Manufacturers such as Tesla, Polestar, and Rivian have pioneered the “car as a software platform” framework. While the car’s actual hardware remains same, its capabilities, user interface, and even performance can be significantly increased via remote software updates. A car you buy today may have additional features, a more efficient power management system, or a fully updated infotainment screen six months later, all while it’s stored in your garage. This reduces the feeling of obsolescence because the car continues to progress with you.

Furthermore, while exciting new battery technology is on the way, the current generation of lithium-ion batteries has evolved into a highly proficient and reliable technology. The worry of catastrophic battery failure is greatly addressed by strong engineering and mandated long-term warranties in Canada, which normally cover the battery pack for at least 8 years or 160,000 kilometres against significant degradation. For a buyer who intends to use their vehicle for the long term (7-10 years), current technology is more than adequate for daily use and will be for the foreseeable future. The decision then becomes a matter of risk tolerance and priorities. Leasing is an easy way to enjoy the best of today’s technology, whereas purchasing represents a secure investment in a strong platform that will provide value and savings for many years to come, even as advancements in technology advances.

Understanding EVs Depreciation and Long-Term Value

One of the most significant financial risks in any vehicle purchase is depreciation—the silent, invisible force that reduces your car’s value the moment you drive it off the lot. For electric vehicles, this has always been a key source of concern, compounded by concerns about battery degradation and rapid technical advancement. 

Understanding the dynamics of electric car depreciation is absolutely essential, as it forms the very foundation of a lease calculation and is the single biggest determinant of your long-term cost when you buy. Choosing what to do involves deciding whether to hedge against this risk or accept it as part of your financial plan.

When you lease an EV, you are effectively outsourcing the risk of depreciation to the leasing company. The entire structure of a lease is built upon a prediction: the “residual value.” This is the leasing company’s expert forecast of what the car will be worth at the end of your term. Your monthly payments cover the difference between the initial capitalized cost and that future residual value. If the EV market takes an unexpected downturn or a new battery technology renders your model less desirable, and the car is worth less than the predicted residual, that loss is the leasing company’s problem, not yours. You are completely insulated. This makes an electric vehicle lease in Canada an effective financial risk management strategy. You get a fixed cost for using the vehicle for a set period, with no exposure to the volatility of the used car market.

For those buying an EV in Canada, however, depreciation has a direct impact on their personal net worth. The moment you decide to sell or trade-in your vehicle, its resale value becomes your reality. Historically, some early EVs depreciated very quickly. However, the market is maturing. Today, the resale value of an EV is influenced by several key factors:

• Brand and Model Reputation: EVs from established brands with a strong reputation for reliability and desirability (like Tesla, Hyundai, and Kia) tend to hold their value much better than those from niche or unproven manufacturers.

• Battery Range and Health: Range is the new horsepower. EVs with larger batteries and longer ranges are in higher demand and depreciate more slowly. Furthermore, the long-term health of the battery is critical. Every EV sold in Canada comes with a battery warranty (typically 8 years/160,000 km) that guarantees it will retain a certain percentage (usually 70%) of its original capacity. A vehicle with a healthy battery, proven by a diagnostic report, will command a much higher price.

• Technology and Features: Desirable features like all-wheel drive, advanced driver-assistance systems, and large infotainment screens contribute to stronger resale value.

For the savvy buyer, depreciation isn’t just a risk; it’s a variable that can be managed. By choosing a popular model with a large battery and taking meticulous care of the vehicle, a buyer can significantly minimize their depreciation loss. In a market with high gas prices and growing EV demand, a well-maintained, 3-to-5-year-old EV can have a very strong resale value, allowing the owner to recoup a substantial portion of their initial investment when they decide it’s time to sell or trade up—a process made simple and transparent with a trusted EV specialist like Carnex.

How To Make a Right Choice with Your Lifestyle?

Beyond the numbers and the technology, the decision to lease or buy an electric car is essentially personal and should be a reflection of your lifestyle, driving habits, and preferences. 

How do you use your vehicle day-to-day? What are your weekend habits, your commute, and your family size? All these factors should play a central role in your choice. Lease or buy an electric car in Canada, one way offers freedom and long-term connection, while the other provides flexibility and constant novelty. Considering your lifestyle honestly is critical to preventing a mismatch between your car and your life, which is an important step when selecting whether to lease or buy an electric car.

Buy an EV
Buying an EV is an act of commitment. It’s for the driver who views their vehicle as a long-term asset and a part of their life. This path is ideal for someone who plans to put down roots with their car. Do you have a long daily commute down the 401 or DVP? Do you frequently take spontaneous road trips to Algonquin Park or the cottage in Muskoka without wanting to worry about tracking kilometers? If so, buying is likely your best bet. Leases come with strict annual mileage limits (typically 18,000-24,000 km), and exceeding them results in costly per-kilometre penalties. The freedom from mileage anxiety is one of the greatest perks of ownership.

Furthermore, ownership means the vehicle is truly yours to modify and personalize. Want to wrap it in a unique colour? Install aftermarket wheels? Add a roof rack for your skis or a trailer hitch for your bikes? Ownership gives you the unrestricted freedom to make the car your own. There’s also the psychological satisfaction of paying off a loan and owning an asset outright. For the buyer, the goal isn’t just transportation; it’s about building up equity in a car that will serve them reliably for a decade or more, with no monthly payments in the later years. This driver undertakes the obligations of long-term maintenance (such as tire or battery replacement) in exchange for complete control and unrestricted use.

Lease an EV
Leasing, on the other hand, is perfectly suited for the driver who values flexibility, predictability, and staying current. This is for the person whose life circumstances may change during the next few years. Are you unsure if your family will grow? Could a job change change your commute? Leasing offers a straightforward exit plan. You are not obligated to keep a long-term asset; instead, you are paying for its use for a fixed time period. This financial and lifestyle freedom is invaluable for those in transitional life stages.

The leaser is also often a driver who prioritizes having a new vehicle with the latest safety features and technology, all while making regular, typically lower, monthly payments. Because you’re only paying for the vehicle’s depreciation, you can often afford to drive a more premium or feature-rich EV than you could if you were financing the entire purchase price. This means more range, a better sound system, or more advanced driver-assist features for a manageable monthly cost. Moreover, leasing often aligns with the vehicle’s bumper-to-bumper warranty period. This creates a worry-free ownership experience where most potential repairs are covered. At the end of the term, you also skip the single biggest hassle of car ownership: selling it. There’s no need to advertise, deal with lowball offers, or handle paperwork. You simply return the vehicle to the dealership and decide on your next ride. This convenience and peace of mind are the ultimate luxuries for the modern EV leaser.

The decision to lease or buy an electric car can be one of the most significant choices for car buyers, but there is no universal “right” answer, only the right answer for you. Your final decision should be a carefully weighed balance of your financial plan, your comfort with new technology, your daily lifestyle, and your long-term goals. 

If you prioritize predictable payments, access to the latest innovations, and a worry-free experience shielded from the risks of depreciation, an electric vehicle lease in Canada offers a smart and flexible path forward. If you see your vehicle as a long-term investment, value the freedom of unlimited mileage and customization, and want to reap the full financial benefits of reduced fuel and maintenance costs over many years, then buying an EV is a rewarding choice.

As the electric landscape continues to evolve, having a knowledgeable partner can make all the difference. At Carnex, our goal is to empower you with the clarity and confidence to make the best decision for your EV journey. Whether you’re exploring flexible leasing options or looking to purchase a customized to your needs. We invite you to explore our electric car inventory and speak with our EV specialists to find the right EV for you.

More from Carnex Blog:

Electric Vehicle Storage: How To Prep Your EV For Long-Term Parking

First-Time Electric Car Driver? Here’s What You Need To Know Before Hitting the Road

Winter Driving with Electric Vehicles: How Much Range These Popular EVs Lose In The Cold

As always, Carnex can provide you with detailed information about buying and selling used electric vehicles in Ontario.

Carnex is the top online EV expert in Canada for buying and selling used electric vehicles in Ontario.

Learn more about the benefits of buying from Carnex. We believe that all clients deserve to know the good and bad of what they’re buying. Because we wanted to know these when we bought cars. That’s why at Carnex.ca, we will proudly display every detail every step of the way. Browse all the best cars, automobile buying tips, auto insurance, young drivers, driving techniques, auto industry trends from Carnex Blog.