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Canvas vs. Leasing
by Benjamin P. • February 19, 2019

The Cost of a Canvas Car Subscription vs. a Vehicle Lease

If you’ve already discovered Canvas, you know that a car subscription can make driving simple. flexible, and convenient. But what about the cost? How does it does compare to traditional options, like leasing a car?

We get a lot of questions about this, and for a good reason: The cost of car leasing is incredibly complex. Dealerships catch your eye with unbeatable-sounding, low monthly rates - but how much will it actually cost you to drive off the lot? It’s almost impossible to know until you’ve spent a lot of time and energy making calls and meeting with dealers.

That’s why today we’re going to unpack the true cost of leasing a car. Spoiler alert: It turns out that Canvas costs significantly less than a traditional car lease when you compare apples to apples. For a basic, affordable sedan, Canvas can save you upwards of $89 per month. Here’s how we got that number.

The Background

Say you’re moving to Los Angeles for a new job. Naturally, you’ll need a set of wheels. You’re just looking for something practical - a sedan on the less-expensive end. Fortunately, there are plenty of options in the $23,000 range, like the Honda Accord, the Hyundai Ioniq, and the Ford Fusion.

It turns out the local dealership is offering a $279 monthly lease special on your favorite model. The contract limits your driving to 10,000 miles per year (833 miles per month), and locks you into a 36-month contract. While three years is a long time, $279 seems like a very manageable number. How does it compare to your other options?

Over at Canvas, you find a similar offer: a 2017 Ford Fusion SE. You can get a much shorter 12-month subscription, and a slightly larger monthly mileage allowance (850 miles per month), for a total of $520 per month.

Sound pricey? Let’s dig into the hidden costs of leasing, and see why that $520 monthly payment ends up being less expensive than your $279 auto lease.

Unpacking the Hidden Costs of Leasing: 5 Sneaky Numbers

1. The Down Payment

When you lease a car, you’ll typically have to fork over a down payment. Some dealerships don’t call it a down payment, instead using terms like “capitalized cost reduction.” (There’s a lot of jargon in car leasing, which is one reason it can get so confusing.) The bottom line is that you need to pay money upfront - and it’s almost always a fairly hefty fee.

Down payments can vary greatly, depending on the car, the dealer, and the promotion. Let’s estimate that you’ll pay 12% of the car’s total price, which is the national average according to Edmunds. That means you’ll owe a $2,760 down payment when you sign the lease. (Because 12% of $23,000 is $2,760).

How does this affect your monthly rate?If we spread out that $2,760 payment across the length of your lease ($2,760 divided by 36 months), it comes out to about $77 extra dollars per month. So your original $279 monthly lease just got bumped up to $356 per month.

With Canvas, there’s no down payment. Just subscribe and drive.

Down payment for your leased car: $77/month

Car lease running total: $356/month

2. Car Insurance

When you drive a Canvas car, you’re automatically protected by high-quality insurance. There’s no hassle, no paperwork, and no additional cost. It comes bundled into that original $520 figure. We even include roadside assistance, so you can get help ASAP in the event of a breakdown. (Learn more about our insurance coverage here.)

When you lease a car, on the other hand, you have to buy your own auto insurance policy. It’s legally required before you can get behind the wheel. This is one of the steepest costs of leasing, and one of the easiest to forget.

The price of your car insurance policy will depend on your particular car and driving record. But we estimate that it will cost at least $164 per month to get insurance of the caliber that Canvas delivers. When we tack that onto your monthly lease payment, the cost jumps to $520 per month.

Auto insurance for your leased car: $164/month

Car lease running total: $520/month

3. Tag, Title, Registration & Documentation Fees

When you own a vehicle, you have to register it with the state and pay for a title and tags. Leasing a car is no different, except the dealership typically does the paperwork for you. They pass these costs on to you directly, and you’ll have to cover them before you can drive off the lot.

Registration, tag, and title fees can vary dramatically between states and counties. In most of Los Angeles, you’ll have to pay about $318 annually to register a $23,000 car. (Pricier cars can cost significantly more. You can get an official cost estimate here.) And because car registration is renewed annually, you’ll have to pay the $318 fee twice more over the course of your 36-month lease.

While it’s great that you don’t have to trudge down to the DMV yourself this first year, you should know that the dealership will charge you a documentation fee (or “doc fee”) for their labor. This generally ranges from $100 to $500, according to Consumer Reports. Let’s say your dealer charges you $300.

So let’s sum it all up: You pay a $318 registration fee every year for 3 years. That’s $954. Add in the one-time documentation fee of $300, and your grand total reaches $1,254. Spread that out across your 36-month lease, and your monthly rate just jumped another $35.

With Canvas, the registration, tag, and title are all included at no additional cost. There’s nothing to remember, and no delightful trips to the DMV.

Tag, title, registration & documentation fees for your leased car: $35/month

Car lease running total: $555/month

4. Acquisition & Disposition Fees

Another cost you’ll have to cover when leasing a new car is the “acquisition fee” (also sometimes called the “origination fee”). According to Edmunds, it typically runs from $395 to $895. Let’s estimate your cost squarely in the middle of that range, at $645.

In theory, the acquisition fee covers the dealer’s administrative costs to set up your lease with the bank or leasing agency. In practice, it’s tough to tell where this money goes, and dealers sometimes mark it up by several hundred dollars. Regardless, there’s no way around it. Consider the acquisition fee a one-time “getting started” cost for your lease.

And 36 months later, when you return your car to the dealership, you’ll have to pay another one-time fee for them to close out the lease. This is called a “disposition fee,” and it covers the dealer’s costs to dispose of your car - e.g. to auction it off, pay a driver to deliver it, etc. A typical disposition fee can set you back $400.

Between the $645 acquisition fee and the $400 disposition fee, these hidden costs run to $1045. Divide that by 36 months, and you’re paying an extra $29 per month.

Acquisition & disposition fees for your leased car: $29/month

Car lease running total: $584/month

5. Routine Maintenance Costs

If you’re leasing a vehicle, getting routine maintenance is crucial to protecting your investment. After all, you may want to eventually buy the car yourself, or sell it to a third party. Even if you don’t, your lease contract likely requires you to get the vehicle serviced regularly. If you fail to follow this schedule - or even just lose the receipts proving you had the car maintained - you could be charged a steep fee.

The required maintenance varies between cars. But at the very least, you’ll need to get a basic engine check, including an oil and filter change, every six months. We’ll estimate that cost at $150 per visit, which breaks down to $25/month, to maintain your leased car. It might not sound like much, but over the course of your 36-month lease, it totals $900 in maintenance costs.

With Canvas, all your reasonable maintenance costs are completely covered, with zero out-of-pocket charges. That means routine maintenance, preventive care, and replacement of normal wear-and-tear parts. Engine, transmission, brakes, front suspension, etc. - it’s all included. Just bring your car to one of our approved service locations and we’ll take care of it.

Routine maintenance costs for your leased car: $25/month

Car lease running total: $609/month

Your Total Savings With Canvas

So there you have it: The car you were planning to lease at $279 per month is actually going to cost you $609 per month when you tally up all the hidden fees. That’s $330 more than you expected - and $89 more expensive than a monthly Canvas payment for a similar vehicle.

Here’s a summary of those hidden costs:

hiddencosts-01.png

Please note that all of these numbers are rough estimates! Costs will vary greatly depending on where you live, how much you drive, the vehicle model, the dealership, etc.

Also note that we’ve ignored taxes for the purpose of this calculation. Car lease taxes are incredibly complex, and vary enormously between states and counties, so we decided to keep things simple. Rest assured that taxes for a Canvas subscription will likely be no more than for a leased car (and possibly much, much less).

The Real Savings Are in Your Heart

Can Canvas help you save money? Absolutely. In this example, Canvas cost $89 per month less than you would have spent leasing a car. That’s $1,068 every year, or $3,204 over the course of the lease. That’s a lot of cash. And yes, we’re proud to offer a financially-savvy alternative to traditional car ownership.

But just as important, we’re proud to make driving simpler, more flexible, and more convenient. With a car subscription, you don’t need to know where you’ll be in three years. You don’t have to study depreciation rates, compare insurance policies, or negotiate with a dealership, either.

In other words, Canvas protects you from the worry, stress, and headache of leasing a car. And those are benefits you can’t measure in dollars and cents.

In this post, we looked at a very simple scenario: A 36-month car lease vs. three years of a Canvas subscription. But what if you need to adjust a lease or change cars? Check out part two to see how Canvas can save you hundreds or thousands of dollars in more complex situations.