Episode 239: Financial Freedom Is Found in the Margins: How Clever Canadians Find Investment Alpha

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Are you accidentally letting “dead equity” sit idle when it could be working harder for you?

Most Canadians think financial freedom optimization is about cutting expenses or chasing the next hot investment. But what if the real opportunity is hiding in plain sight — in your car, your mortgage, or any asset quietly losing value? In this episode, we unpack a simple car lease scenario that reveals a much bigger question: Are you thinking strategically about debt, equity, and optionality — or just following the default path?

If you’ve ever wondered whether to pay cash, finance, lease, invest, or “just play it safe,” this conversation will challenge how you evaluate those decisions.

In this episode, you’ll discover:

• How to spot “alpha” opportunities — small arbitrage moves that compound into meaningful advantages

• The difference between depreciating vs. appreciating assets — and how to reposition equity more strategically

• Why optionality might be one of the most overlooked principles in building long-term financial flexibility

Press play now to start seeing everyday financial decisions through a sharper, more strategic lens.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX. 

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

In this episode of Canadian Wealth Secrets, a simple vehicle scenario becomes a powerful lesson in alpha, arbitrage, and optionality — revealing how smart Canadians can reposition debt equity into appreciating assets while strengthening risk management and long-term personal finance outcomes. We connect this thinking to a broader Canadian wealth plan focused on financial freedom in Canada, early retirement strategy, and building long-term wealth through tax-efficient investing, RRSP optimization, and capital gains strategy. Whether you’re weighing real estate investing in Canada vs renting, deciding between salary vs dividends in Canada, or designing financial buckets inside a corporate structure, this conversation highlights practical investment strategies for entrepreneurs seeking financial independence in Canada. From corporate wealth planning and business owner tax savings to passive income planning, estate planning in Canada, and optimizing RRSP room, the episode reinforces how intentional financial systems, diversification, and corporate investment strategies can support legacy planning in Canada — all while maintaining a modest lifestyle wealth approach grounded in clarity, flexibility, and strategic financial vision setting.

Transcript:

Jon Orr: Okay, I want to start with a very specific scenario that we were discussing and you found yourself in. Because I think there is a lot of value in the principles and the fundamental beliefs that extend beyond this one scenario that we will generalize for you the listener. I think there’s a lot of value in here. we’re gonna…

Let’s unpack the scenario here, Kyle. You were recently looking on Facebook and an ad came across your way and it led you down the path of going, you know what, let me look at leasing my next vehicle. Tell us the story here.

Kyle Pearce: Yeah.

Yeah.

Yeah. Like I’ll tell you this much right now. I’ve got a vehicle. It’s a 2019. The thing works. It’s fine. Everything’s great. You know, and everyone listening to the show who’s listened for a while. No, I’m not like all in on getting the coolest, newest, flashiest vehicle. Okay. I’m like, I need, I need functionality. I’ve written cars into the ground in the future. Maybe I’ll do it again, but in this particular case,

Jon Orr: So you’re like, I’m now drawn to like, give me the brand new car.

Kyle Pearce: Yeah, exactly.

Well, I’ll tell you this, the ad worked well. Let’s put it that way because you know what I noticed about it was that it was, know, as as they as all the ads are right, the blowout sale, the whatever like I’m fine to take the 2025 model. It’s a new vehicle, you know, like none of that stuff really bothers me a whole lot. But what catches my attention is when there’s a low amount.

And, and you know, immediately in my mind, you know, the thing we’re going to kind of unpack in this episode is just talking about how all of this work we do here at Canadian Well Secrets, it’s all about trying to like seek out alpha, you know, and like trying to find little ways, you know, that that little advantage, right, the optimization opportunities, and sometimes they’re not worth it, you know, like, let’s be honest, like, sometimes we, we spend way too much time trying to optimize on something.

Jon Orr: Whoa, what’s alpha?

Kyle Pearce: But I’m going to argue though, that depending on who you are, and a lot of people listening to the show, I think are a lot like us where they get like excited, you know, at the opportunity, like so in your spare time, like you want to go, hmm, is there a play here? You know, like, what is what does this look like all of my time all of my time is spent doing this type of work.

And, you know, I’m thinking to myself, okay, my vehicle, it’s worth, you know, probably I do a quick Google search and of course there’s a big range. I always go on the conservative side. I’m like, I could probably get, you know, 25, $30,000 out of the vehicle that I’ve owned since 2019. Okay.

And we won’t go down the rabbit hole there, but that was another arbitrage scenario where I ended up in that, in that vehicle. This one here, same model, same package, just newer, you know, newer version of it. And you know, the lease price looked pretty, pretty good.

You know, go down the rabbit hole, start to see that, shoot, if you need certain upgrades, this, that, and the next thing, all of a sudden this price is, you know, climbing, I’m less interested. But at the same time, I come across this site called Leasebusters, you know, so somehow a cookie, I looked at that ad and then all of a sudden now everyone in the world suddenly knows that I’m looking at, you know, vehicles.

And I find the same vehicle. Again, I don’t care about the color. I don’t care about, you know, any of this stuff. A person who has a lease on this site called Lease Busters, who’s trying to get out of the lease and actually wants to pay someone to take over the lease, you know, so it’s a 36 month lease. 12 months have already been used. So I’m getting a slightly used vehicle here, but they’re willing to like actually pay to get out of this lease.

And the price point on the payment would be like about six months of lease payments, essentially free.

Jon Orr: So they’re gonna pay you six months of lease payments to take it off their hands. All right.

Kyle Pearce: Exactly, exactly. And a lot of people might say like, what the heck’s going on here? Like maybe there’s a problem with the vehicle, you know, like all of these things sure are going to go through your mind, you got to do your due diligence.

But ultimately, this is a person who was basically gifted a car and is like, I don’t need this lease anymore. I could keep paying into this lease for two more years, or I could pay a quarter of the remaining payments to somebody else so that I can save the other three quarters like a perfect match made in heaven. This person’s in, you know, a guy looking for alpha and he’s like, I’ve got alpha sitting in my driveway. So let me out of this lease. I’m willing to pay someone else to take it on. And to me, that’s like a perfect example of alpha working in our favor.

Jon Orr: Okay, so you’re saying, because what it sounds like you’re saying is like, hey, I could have got this lease over here if I went with the dealer straight off and this person is willing to get me out of a, or they wanna get out of a lease and they’re gonna pay me, so there’s a little bit of money there that I wouldn’t have got the other way around and you’re saying that’s alpha, but someone else on the other end is saying, yeah, but Kyle, you’ve got no payments in a car right now and you’re signing up for, not two years of payments anymore because you’re getting six months for free.

You’re gonna sign up for like, I’m gonna get a year and a half set of payments to get this lease and then not own a car at the end of that time. So somebody’s like saying, why is that a better deal? Where’s the alpha?

Kyle Pearce: 100 % and I would argue and I’ve been that guy. Yeah, exactly and I would say this is the interesting part about all of this work, you know, whether it’s investments, whether it’s things that you need for your life and your life’s work or your lifestyle.

All of these things. There’s no say one right or wrong answer. It’s all about like sort of where it lands for you.

So to me, I look at and go well, I’ve got I’ve got a truck sitting there, it’s seven year used, things are coming up for repair, new brakes, we’re gonna need new tires soon, we’re gonna need all kinds of these things, and in general, it’s a depreciating asset, we know that, we know it doesn’t hold onto its value forever.

And when I look at this and I go, this thing’s worth say $25,000, and if I’m gonna lease this vehicle for say the next two years, at the end of that, I will have the option, we talk about optionality all the time, to either buy this thing out for around $40,000 or I could find another vehicle some other way, like whether it’s like trying to do something similar or whether it is maybe just buying that newer vehicle.

Because remember, two years down the road, my vehicle is no longer gonna be worth $25,000. It’s gonna be worth less, you know, and I don’t know how much less, but the further it goes, the less it’s gonna be worth.

And in the meantime, I could sell that vehicle, take that 25,000 and maybe, maybe just maybe throw it into the market in the meantime, or throw it into maybe a safe, I call it a safe, a more consistent income stream investment, let’s say 10 % a year.

And you go, you know what, 2,500 bucks a year on $25,000. At the end of the day, you could essentially be kind of in a position where most of this cost may actually be arbitraged out by simply taking the equity from that vehicle that’s sort of sitting there and is getting, you know, the value is just going and dropping over time.

And it’s going to have more and more needs in order to keep it going and we can put it into some sort of appreciating position, be it the market, be it a private capital fund or any such or a private credit fund, I should say, or anything along the way where you’re gonna gain some arbitrage there and potentially if needed or wanted, you could even use some of that cashflow to help you make the payments that you were gonna make anyway.

Jon Orr: Got it, got it.

So, and I know, you know, I know this is one of the so bigger ideas here is that the way that I think you looked at this is, and this is something that I think you you’d always do well at is trying to figure out where do I get the arbitrage? Where do I get the alpha? This bonus, this little inside advantage that I wouldn’t have got without doing a little bit of digging, a little bit of learning here.

And you’re not only looking for that as all you always do but another guiding principle. I think when you make decisions around your money is yes, I want to look for where this advantage is this arbitrage this alpha but the other guiding principle I think that you hold and I think we want to generalize here is is the idea of debt equity like you you were looking at your car and going. Okay. I got a depreciating asset.

Could I transfer that into an appreciating asset and still gain the advantage in this scenario? And that’s the move you ultimately said, that’s a better move for me now, knowing that I’m down the road two years, I’m gonna have to get a new car anyway, or I’m gonna have to put the money in here anyway. So you’re not getting out of this expense that’s gonna be there because someone might say, well, you signed up for an expense that you didn’t have to have. Well, you’re saying there’s a point here that I needed to decide.

That I could just keep driving this car into the ground, but then I won’t have an appreciating asset somewhere. I will have this, and then I’ll have to get the expense anyway. Maybe there’s this move here that makes sense for you right now.

And the two guiding principles right here are, can I turn this into an appreciating asset so I don’t have this equity getting eaten away, or it’s not taking advantage of? Like imagine the car didn’t depreciate in value. You still had 25 grand sitting there doing nothing for the next two years, when you’re saying, could put it over here and earn, let’s say, let’s say I even earn 9 % on that, I’m gonna get 2250 a year in if I put it into the 9 % investment.

And so that seems nice to offset your payments, but I mean, what you’re doing here is you’re looking for, how do I get out of this or how do I transfer equity or debt equity into appreciating equity and how do I look for this arbitrage.

And the other thing that I think you kind of said, and we said earlier, is another guiding principle I think you use in your decision making is optionality. And I think you created that here today, you know, in this scenario is to say, can I be put myself in a better position to give myself more options in the future and then instead of less options in the future?

Because this is the pivotal moment in this scenario is to say, is like, okay, if I don’t do this, then I only have one option. The car is gonna be worth nothing in a few years and I’m gonna be stuck going, do I buy a car, do I lease a car at that point? But no matter what, I don’t have any really options.

Whereas you’re saying, hey, at the end of these two years, this car might be worth less or more or the same as we’re buying a new car of the same type, the same year and the same model. And I don’t know that, but I will have the option at that point. Plus I have the option of taking my $25,000 investment that I just moved and using that to buy the next car. Like that’s more options.

Kyle Pearce: Exactly.

Right.

And not to mention, it’s like you actually can arbitrage it if you think about it from a lease perspective, right?

And, you know, this is very similar to like in the insurance side, like some people say, like, you know, buy term invest the difference, you know, the challenge with doing this type of work is whether quote unquote, you need it forever. And whether it depreciates over time. So like term insurance depreciates over time in a weird peculiar way in that once the term’s done, it costs a lot more to keep it. So that’s like depreciation, if you think about it, right? Because like the cost jumps, right?

So that’s a really hard thing. With a car, it’s a depreciating asset there as well. So like you’re saying, if you were to take the lease and you were to invest the difference between financing, it’s likely, again, investments are not guaranteed and markets go up and down and who knows, are we gonna go into a five-year bear mark? Like nobody knows those things, but it seems like a risk worth taking, right?

Instead of burying a huge down payment into a car, some people will buy a car with all cash. And again, feels great. And if that makes you sleep great at night and that’s what kind of keeps you ticking, amazing. They would be the exact opposite of me, right? Like I would be like sitting in bed going like, what should I have done instead? you know, instead of doing that.

I love your idea here and here’s the nuance that’s really interesting. So in this particular case, I’m gonna talk real numbers.

I’m gonna sell this truck, my truck that I own for 25 or better. So I’ve got 25,000 in mind as sort of like the floor. That’s what the dealer would give you type thing. So probably gonna do better, but let’s use that low floor number.

I’ve got 25,000. Get to put the 25 in our pocket now. This particular lease, because this individual is actually paying for some of the months of this lease, I’m actually gonna pay 13,700, so call it $14,000.

So $11,000 arbitrage between these two things in order for two years from now, me to have the right, or not the obligation, but the right to buy this truck out for $40,000.

If I fast forward two years from now and I do the math and say that 25,000 could be earning eight, nine, 10 % a year. Maybe it does better, maybe it does a little worse, but you’re earning some money on it, assuming you did something smart with it.

And then two years from now, I go to do the same move, meaning I got to get rid of my original truck. That original trucks no longer were 25,000. I don’t know what it’s worth. I don’t know if it’s 20, I don’t know if it’s 18, but the reality is, is that that 25 is now worth more.

And it’s actually closer to the amount that I would need if I want to buy out the truck, $40,000.

Now, again, some people would say, well, why do that? And you’re right, I wouldn’t do that. I would probably borrow from a line of credit unless I could get a rate better somewhere else in order to make smaller payments so I don’t have to actually get rid of that investment that I had put in there in the meantime, right?

And as long as your cashflow is working for you, right? We don’t want to get into a position where cashflow becomes so tight that this is really hard or really difficult.

But the reality is, is that we’ve got two years of optionality, just like you said. We’ve got money that’s now out of the old vehicle. We’re slowly putting some money into this newer vehicle.

And in two years from now, we get to look around and say, is this vehicle worth 40,000? Is it only worth 35,000? If so, then I’m not gonna take, you know, I’m not gonna buy out this lease, but maybe it’s worth 45,000.

Like maybe they calculated it wrong and it’s actually worth more. And then I’ve got the option to go, do I want to buy this thing? Do I want to walk away? Maybe there’s another opportunity out there.

One thing that I do know is that if two years from now, let’s say I didn’t want to buy this truck out. If I go look around for my 2019 truck, I could probably buy it for a whole lot less and be further ahead. Having done this particular maneuver in order to keep a newer car, not have the hassles, you know, engine lights going on or this and that and the next thing. And hopefully two years from now, we’re in a more advantageous position.

Jon Orr: Right.

Right, yeah, I was gonna say, there is some factors happening in here that you’re looking to get some benefits of like, why wouldn’t I just do that and then buy a crappy car? I’m gonna be way better off if I do that, right?

Kyle Pearce: 100%. You know what? You’re going to be way better if you just take the bus. Like, you know, I mean, I don’t have access to the bus, but if I did have access to a bus, if I was on a main bus line and it could get me around, I probably still wouldn’t want to do it because I want my own vehicle.

And, you know, and so these are the these are the tough challenges when we’re looking at optimizing. We’re trying to figure out like, how could or should I do things?

The hardest part is that you can’t look around and just copy what someone else is doing because they have different goals, they have different wants, they have different needs, they have things that keep them ticking and this is what makes this such a challenging situation.

So another quick arbitrage that we can use as an example here as we wrap this episode up because I think that like the key messaging here is look at your situation and try to figure out like where are these arbitrage opportunities sitting before you?

The example I’m going to use is what we currently do.

So we both have primary mortgages. We have never been in a rush to pay them down, especially in the last five years, right? My previous mortgage interest rate was like lower than 2%. So it was like 1.84 or something like that. So there was really like no logic in paying that thing down in the meantime.

But now that rates are a little higher, we are now more actively utilizing the Smith maneuver again, where we go, okay, now it makes more sense. If I’m gonna take a dollar and put it into the market, I’m gonna take that dollar, put it on the mortgage first, and I’m gonna reborrow it back to create ourselves some tax deductible interest that we can write off against other income because we’re business owners.

This allows us to take out a higher income from our businesses because of this write off that we’re providing.

And here’s the crux of the situation. Here’s the, I guess the, the reasoning behind why we’re so confident in doing this particular move is that when we look on the other side of our corporation and we see all of the retained earnings there, we’re funding high early cash value policies there, which are acting like the same dry powder we would have had with our home equity line of credit over here. We’ve just got it on that side of the border.

So that level of safety, I’m a very sort of conservative, over thinker. You know, my wheels spin, if the risk is too high, I don’t sleep well at night.

Over here is where I’m keeping my quote unquote dead equity from my home, but I’m doing it in a tax efficient way, which also still leaves it available for other amazing investment opportunities.

So the key for us is all about how do we take our own situations, our own lifestyle sort of choices, wants, needs, and future wants and needs, and how do we make this work in a way that’s going to not necessarily give us the greatest overall return or the greatest overall net worth of all time, but to give us the right risk profile, the right alpha that we’re after in order to maximize the situation for our lifestyle, for our needs and our wants.

And that for us, I think is one of the key pieces that I’m hoping those who are listening to the show are kind of taking away from this, that there is no rule of thumb that’s gonna be the right move for every single individual because we are so incredibly different.

Jon Orr: Well said, well said.

And I’m gonna encourage you right now to reach out if you’re getting emails from us. Hit reply on one of those emails. If you are following us and you’re watching this on YouTube, write a comment on YouTube. If you’re listening to a podcast player, go get on our email list and hit reply.

And I’m encouraging you to do that because we wanna hear where are the arbitrage moves that you’ve made that have made some difference? That have made you sleep better at night, knowing that you’re taking optionality. You’re making sure that you’re creating that for yourself in the future. You’re maximizing or thinking about how to use your debt equity to transfer assets into appreciating assets.

How do you find that arbitrage? How do you find that if you’ve got some moves? The fact that you’re listening to this, Canadian Well Secrets is all about trying to find that arbitrage and those moves to make.

And the secret here today is to think about these guiding principles.

So we want to hear is like, where are some of those arbitrage moves, these alpha moves that you’ve created along the way? Hit reply on any of those emails or in the comment. We want to hear about them specifically. Maybe we’ll do a show on that move moving forward.

Kyle Pearce: I love it. I love it.

So head on over to Canadian Well Secrets dot com forward slash pathways or slash discovery to book a call today.

And just a reminder, this content is for informational purposes only an education. You should not construe any such information or other material as legal tax accounting, investment, financial or other advice.

And as a reminder, Kyle is a life licensed and accident and sickness insurance agent and has completed the Canadian Securities Course or CSC along with being the President of Canadian Wealth Secrets.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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