Is 2017 going to be the year you upgrade your wheels? Maybe trade in the family vehicle for a sporty new look? Perhaps you’re expanding the family and need something bigger. Whatever your reasons may be, figuring out how to pay for it should be one of the first decisions you make.

According to JD Power, a market research firm that specializes in the automotive industry, 26 per cent of new vehicles sold in the past year were leased rather than financed, which is up from 22 per cent two years ago. So, is it better to lease a vehicle or finance one? Here’re some thoughts to help you decide what’s best for you.

Financing a vehicle

There are several benefits to financing, but perhaps the biggest one is that after just a few years you’ll own the car and can build equity. Cars in Canada are lasting longer than ever — the average lifespan is 10 years — meaning you can pay off the loan and still have a great car to drive for years afterwards.

On the flip side, financing can also mean larger payments, and if you don’t make them on time it can hurt your credit rating. Financing also means that once you own your car, it’s harder to sell it and get an early upgrade.

Leasing a vehicle

Leasing a vehicle means you agree to make monthly payments based on the amount between sale price and predicted depreciation, also known as residual value, over a set amount of time. Often this can mean smaller monthly payments and when your lease is up, you can return the car and get a new one. In fact, JD Power reports that in October, the average new-vehicle lease payment was approximately $520 a month while the average new-vehicle loan payment was approximately $570.

When leasing, you are often required to stay within a certain allotment of kilometers per year, which will help with the resale value after your term is up. You will also be required to keep up with regular maintenance.

What it boils down to

Ultimately the choice to finance a car or lease a vehicle comes down to which is best for you and your situation. It’s always good to discuss your options with your dealer and make sure you understand what each will provide you with. Once you’ve got this part sorted out, then you can begin the fun part — shopping and test driving!