The 2018 Canadian Car Buying Guide

Where to start

Canadian consumers have a wealth of options when buying a car: there are dozens of makes and hundreds of models out there. And choosing the right one can be complicated. Is an SUV right for you, or would you get better bang for your buck from a hybrid? Is the electric car the way of the future?

Like we said, choosing isn’t easy.

That’s why we’ve created the Canadian Car Buying Guide. We felt it’s about time that there’s an in-depth guide out there that walks drivers through the steps of finding the right car.

Step one is to create a budget. You need to understand the costs of a car, and what you can afford. Remember, whether you’re leasing or financing, buying new or used, there’s going to be monthly costs associated with your vehicle. Gas, maintenance and insurance all add up.

Take some time to calculate your monthly income and your monthly costs. How much money do you have to put toward your vehicle? That’ll determine what you can afford. While a flashy sports car might be your dream, buying a car that’s beyond your means can quickly turn into a nightmare. Missing car payments can hurt your credit score (along with your chances to buy a home or get approved for other loans).

Once you know what you can afford, it’s time to make some crucial decisions. Below, we take you through the major choices you’ll have to make, and lay out the pros and cons of each. If you have feedback about anything below, reach out to us on Facebook or Twitter and tell us how we can make this guide better! Back to top

New cars

Perhaps the most obvious advantage of buying a new car is that it’s, well, new: the car is probably never going to function better than it will during those first couple of years, when the engine — and the car’s other parts — are in their prime.

When it comes to parts, another advantage of buying new are features that you won’t get on older models. Most new models offer safety features like blind spot warnings, forward-collision warnings, lane-keeping assistance, and adaptive cruise control — all of which not only minimize the risks of driving, but might also help you qualify for a lower auto insurance rate (we’ll get to that in more detail in the “Insurance” section). Newer models also tend to be more fuel-efficient, which could help you save money on gas in the long run — and minimize emissions to boot.

One final advantage? A warranty, which will protect you if something goes wrong with your car and it’s a manufacturing default.

What to look out for

As with any major purchase, the key here is research, research, research. Consider what you need a car for, and the types of vehicles that will serve those purposes. Let’s say you have three kids, a partner, as well as friends and relative whom you intend to give rides to from time to time — a car that could accommodate more than five people would probably make the most sense. Or, let’s say you live in a dense city like Toronto with small parking spaces — perhaps a more compact model is in order.

Other big factors to take into consideration revolve around cost. How much will it cost to insure different models? Could you afford those premiums? How fuel-smart is your car, and how much do you stand to regularly pay for gas? (Natural Resources Canada has a guide that compares the fuel economy of different vehicles for you.) Which add-on features do you really need, and which only serve to up the cost of the purchase price — e.g., high-end sound systems — without improving the vehicle’s overall functionality?

And then, there’s the matter of safety: the Insurance Institute for Highway Safety provides safety ratings for popular vehicles, so you can see how your choices hold up.

Sometimes, buyers end up with a dreaded “lemon.” This is a new car that has several manufacturing defects that lead to costly and constant repairs. Test driving a vehicle and taking it on a variety of roads such as highways, can better give you a sense of whether the car you’re buying has any defects. Look out for the engine light (a major sign something is wrong, especially on a new vehicle) and listen for any vibrations or excessive revving when you’re speeding up the car.

Luckily, with a new vehicle warranty, the dealership should handle any necessary repairs to address a lemon. This is one of the advantages of buying new, since a used lemon won’t come with such a comprehensive warranty.

A final, and not always obvious thing to consider, is whether you actually need a car at all. Joining a car-sharing co-op might be enough to meet your needs.

Don’t get ripped off

The first, and most important rule? Make sure you know exactly what you’re paying for. Have the dealer break down the total cost of your purchase, and if there’s anything that you don’t completely understand, ask questions.

Another rule is to compare your dealer’s prices with prices elsewhere. Are you actually getting a good deal on your car? Are the interest rates significantly higher than they are elsewhere? Dealers might try to sell you package deals that seem like a good investment because they offer perks like “free oil changes for life,” but if you weigh the cost of an oil change and how frequently you have to get them (e.g., several times a year), against the amount of money you’ll be spending on your package deal, you may find that the latter isn’t such a deal after all.

Tech features worth paying for

We’re a fan of features that have been proven to increase your safety. Automatic emergency braking, forward collision warning, lane departure warning, and blind-spot monitoring all do just that — and are worth having on your car if it’s in your budget.Back to top

Used cars

The main advantage of buying a used car is that they’re typically cheaper than a new one. About 59% of prospective Canadian buyers will buy a used vehicle this year, according to a 2016 report from DesRosiers Automotive Consultants. A car is a depreciating asset, meaning, once you drive it off the lot, it goes down in value rapidly. For example, a new car that sells for approximately $28,000 (USD) will depreciate by around $7,500 (USD) after the first year of ownership, according to U.S. auto comparison site Edmunds.com. On average, new cars depreciate between 15% to 25% each year.

But there are other reasons for buying a used car, too. Greater selection, for one: prefer the Ford Escape from 2009 over the 2018 model? If there’s something specific you’re after and you’re not impressed with the releases from the past year, buying used might be the better option for you.

What to look for 

If you’re looking for the best value for your dollar, look for a car that’s reached the bottom of its depreciation curve — typically one that’s coming off a three or four-year lease.

After price, the most important factor to consider is the car’s mileage. The average car will travel 20,000 km per year (that’s the distance that manufacturers use to determine standard warranty coverage). So, a four year-old car should have 80,000 km on the odometer.

But the most important thing — and even harder to judge just from looking — is the car’s condition. A used car in good condition with a lot of miles is more desirable than one with fewer miles but in rough shape.

A quick visual inspection will often reveal whether the car’s been babied or not, but you still need to go a step further. After all, a car can appear like it’s in mint condition because it’s been in storage for a while. But that’s not necessarily desirable: cars need to be driven regularly, or else they’re more vulnerable to mechanical failures, and electrical systems may break down without regular use.

What you need is the complete picture of the car’s history. Ask the seller for the car’s vehicle identification number (VIN) and ask for documents that show its full history of repairs and whether it’s been involved in any accidents. In Ontario, a seller is legally required to provide that information courtesy of a used vehicle information information package (UVIP). To find the equivalent in your province, check with your transportation ministry.

There are also a number of services that will do a background check for you. A CarProof report can help identify previous accident claims and any outstanding liens by pulling information from publicly available databases in Canada and the U.S. However, the accuracy of the report depends on whether the registrars throw up barriers to the data. A 2014 CBC investigation found that CarProof reports for vehicles in Saskatchewan, B.C., and Alberta were missing important information. The company said the discrepancies can be explained by the fact that each province has different rules governing how third-parties can mine the data. For example, the Insurance Corporation of British Columbia charges CarProof extra to access its registries. The lesson: backgrounding services are helpful, and can be a good starting point for your research, but there’s no substitute for first-hand research. Don’t entrust anyone else to kick the metaphorical tires for you.

Where to look

When you’re in the market for a used car, there are two routes to take: you can buy from a private seller or a licensed dealership. There’s a lot of upside to buying from a dealer. There are way more consumer protections and quality standards in place to protect you. So, regardless of which province you live in, you can expect to be sold a relatively safe car from a dealer. Plus, the dealer takes care of all the paperwork involved with transferring the ownership of a car. I Private sellers, on the other hand, will often offer you a lower sale price. After all, they don’t have the burden of paying for advertising and other administration costs. The main drawback of buying from a private seller is the relative lack of transparency. Sellers could be concealing major issues from you in order to close the sale. Which brings us to making sure you get a fair deal.

Avoid getting swindled 

Afraid you won’t be able to spot issues with the car? Don’t worry. You should always ask the seller to allow you to take it for a test drive as well as to a mechanic of your choosing for a pre-inspection. If they don’t agree to this, or if they insist you take it one specific facility, you might be dealing with a curbsider.

A curbsider is an illegal, unlicensed dealer who poses as a private seller to conceal an underground automotive business — an unlicensed dealership, for instance. Repair shops have been known to use curbsiding to get more business.

Curbsiders are notorious for misrepresenting the insurance, financing and repairs history of the cars they try to pawn off. Overall, it’s hard to tell the difference between a legitimate car seller and a curbsider — individual sellers don’t have to be licensed to sell a car. It boils down to whether you, the buyer, understand best practices for how a sale should unfold and whether you can detect when things are going awry. Ontario’s Vehicle Sales Regulator has flagged some of the telltale signs that you’re being hustled:

• The car’s priced below market value
• The car’s not registered in seller's name or has only been registered in his/her name for a short period of time
• The seller doesn’t provide vehicle history report
• They also refuse a vehicle inspection by the purchaser’s mechanic
• They only want to meet in public
• And they won’t provide a receipt or proof of purchase Back to top

Car Insurance

In Canada, it’s illegal to drive a car without auto insurance or plates — and you can’t get the latter without the former. In British Columbia, Manitoba, and Saskatchewan, auto insurance is provided by government-run insurers, but in the rest of the country, drivers have the choice of shopping around for an insurer.

Third-party liability insurance — which covers, up to a certain amount, any damage that you inflict upon another party’s property, as well as the expenses of a third party’s injury or death — is mandatory in Canada, so every driver needs to have it.

Other types of coverage, including collision insurance and comprehensive coverage, are also available, but you may not need them — consider whether the risks they cover are likely to crop up given the type of vehicle you have, how frequently you drive, etc.

What you should know

If you’re in a province that has government-run insurance, there are situations where you can shop around for private insurance. In B.C. for instance, once you get your basic coverage offered by ICBC, you can shop in the private insurance market for additional coverage such as collision or comprehensive. These help expand your coverage to include things such as chipped windshields and theft and vandalism.

For provinces with a private insurance market, drivers will begin their insurance hunt with a lot of choice. Comparing the market on your own can take a long time. Rate comparison websites are often the best option in these provinces — for instance, we allow you to compare quotes from dozens of car insurance providers in your province in just three minutes.

How to get the cheapest car insurance

It’s about shopping smart. While we recommend you start by comparing policies from different insurers, it’s also important to know all your options and how they work.

For instance, whether you settle on an insurance company or a broker (and if you don’t know the difference, we explain that here), ask questions. Make sure you’re getting all the discounts you’re entitled to, and keep abreast of loyalty programs that you can sign up for, and always, always ask for a breakdown of your total, to make sure you’re not being charged hidden fees.

What affects your car insurance

Ah, the age-old question: everyone wants to know the answer, but in truth, that answer will vary from insurer to insurer, as well as from customer to customer.

Every insurer uses a different algorithm to determine their customers’ rates, and no two customers will get the same rate from the same insurer. That’s because insurers take a variety of factors into account, and also assign each of them different weights. These factors include things that are unique to you (e.g., your claims history and driving record), as well as demographic data (insurers will look at how statistically likely people who share your age, gender, neighbourhood, and vehicle type will get into accidents). Because different insurers weigh each of these factors differently — in other words, your age might matter more to one insurer than it will to another one — it’s important to shop around and compare rates from different companies. Never commit to a policy without doing research first.

In the end, however, your driving history is going to be one of the most important factors affecting your rate. Every accident you’re in or claim you file has the potential to impact your rate. Traffic tickets such as those for speeding will also force you to pay more. Maintaining a good driving history by driving as safely as possible is one of the best ways to keep your insurance rate low.Back to top

Licence and Registration

Before you can operate your car, you need to register it with the province. The point of this is to create a record of the vehicle and its ownership history. You need to register it before you can get licence plates and insurance.

After you register your vehicle, you’ll get a vehicle permit, a licence plate and a licence plate sticker. (And don’t forget, you need to renew your licence plate and the licence sticker annually.)

If you buy a new car from a dealership, the dealer will register it for you.

If you’re leasing a car, you don’t need to worry about registering it. The lease company is the official owner; you don’t own the car, you’re renting it. If you’re purchasing a used car, you need to transfer the ownership, and there’s usually a limited time frame to complete the process. In Ontario, a buyer of a used vehicle has to register it with the Ontario transport ministry within six days.

Regardless of the scenario, here’s what you need to bring to the registration office:

• The proof of ownership document, typically a lease or a bill of sale
• Proof of valid car insurance
• An accepted form of identification, usually a drivers’ licence
• If you’re originally from another province and are registering a vehicle bought in your home province, it may need to undergo re-inspections If you move to another province, you need to register your car in the new province, again within a certain timeframe. In Alberta, for example, you have 90 days to register the car. Back to top

Financing

Let’s talk money.

Now that you’ve decided to purchase a car, it’s time to look at the options available to be able to afford the car you want. Since buying a car can create a pretty significant dent in your bank account, people (unless you can buy a car outright) turn to financing.

First, you have to know your credit score — your score will determine the rate you will get when financing. The higher your credit score, the lower your interest rate. Of course, being offered a juicy promotional rate — some right now are as low as 0% — might tempt you to spend more. An aggressive salesperson might even push you to spend more than you can or want to, making either your monthly payments higher or the length of time to pay off the car longer. While things may change when you enter the dealership, having a plan in place will give you the confidence not to budge or be upsold.

We know buying a car for the first time can be stressful, but know that the ball is in your court and you have options. While you may have a specific car in mind, make sure you compare prices from a few different dealerships and find out what payment plans they offer so you know you are getting the best deal and the dealership has your best interest in mind.

Although this section of the car buying guide is on financing, we want to let our readers know that it isn’t the only option and you can also lease the car. While both of these options require you to make monthly payments, there are a few differences to keep in mind.

Financing

• Once you pay off the car, you own it
• You can put as many kilometres on the car as you’d like
• You don’t have to worry about “wear and tear”
• Customize as much as you’d like
• Higher monthly payments than if you lease
• Can sell/trade your car whenever as long as you pay the outstanding balance

Leasing

• Once the lease agreement is up, you must return the car
• Charged extra if you exceed your km limit
• Charged extra if you return the car with significant “wear and tear”
• Any customizations you make must be removed when returning the car
• Lower monthly payments than if you finance so you can afford a nicer vehicle
• Charged a fee for ending the lease agreement early

So, you’ve decided to finance your car, After budgeting your expenses and knowing what you can afford, are you going to get a used car or a new car? Are you going to finance with a bank or with a dealership? Financing is different for each, and here we break it down.

New car

• Lower interest rates
• 0% financing if your credit score is good
• Fixed warranty

Used car

• Low insurance rates
• Minimal registration fees
• Loans are smaller
• Interest rates are higher
• Cheaper in the long run

Dealership

• Easier — one-stop-shop and you can drive away with the car on the same day
• High pressure environment — make sure you read the fine print
• Dealer rates are marked up from the bank’s rates
• Lower interest rates if you’re buying a new car
• If you’re late on a payment it will be a headache since the dealer deals with their own bank, not your local bank

Bank

• May turn down your loan application especially if you have bad credit
• Your local bank may be more likely to accommodate you if you have a late payment
• Won’t mark up interest rates since there is no “middle man”
• Interest rates are higher and not really negotiable

The last thing to keep in mind when financing a car is prepayment penalties. Depending on your financial situation, you may be in a good place to pay off a lump sum or your entire payment. However, before signing anything, ask your dealership or bank about prepayment penalties as you may be required to pay a fee if you want to pay off your car earlier than the term agreement. Back to top

Maintenance

Here’s the not-so-fun but important-to-know aspect of buying your first car — maintenance.

While you may be dreaming of the days you finally don’t have to take public transit to work or to see your friends, if you don’t know what your car needs or how much it costs to run smoothly, you won’t have a car for long.

The first thing you should do when you purchase your car is read the owner’s manual. This manual covers everything from warning lights to spark plugs and everything in between.

Here are some of the things you, as a car owner, need to be aware of to ensure the car you’re driving is safe for you and your passengers, and to be on the road:

• Check your tire pressure (keep an air pressure gauge in your car)
• Regularly check that all lights are working and listen for abnormal sounds
• Check your fluids including antifreeze, power steering, coolant, and wiper fluid
• Check your oil and change it based on the timeline in your owner’s manual
• Check your battery
• Replace your windshield wipers and cabin air filter (this can be found under the hood or dashboard or behind the glove compartment)
• Change your spark plugs
• Make sure you get snow tires in the winter

While most of these can be done on your own, it’s important to still take your car to a mechanic — the mechanic will see things you don’t and will make sure everything with your car is up to date for safe driving. If you’re nervous about checking out everything listed above on your own, mechanics are there to help.

When you take your car to a mechanic you have two options: taking your car back to the dealership or an independent mechanic shop. Both have pros and cons.

Dealership

• They know your car and are experts in that specific make of car
• Expensive
• Will keep track of when you need recommended service and contact you

Independent shop

• Longer lasting relationship. Independent shop mechanics work on a variety of cars so if you get a new car and it’s not from the same dealership, you can still have your car maintained by the same person
• Cheaper prices

Check out their ratings and reviews online and ask friends for recommendations. After all, your car is expensive and you don’t want to be paying more for a repair because a shady dealership or independent shop overcharged you.

One of the most important aspects of maintenance is paying attention to recalls. When your car has been recalled, it means a piece of equipment is no longer working and your car may even be dangerous to drive. If this ever happens, take action right away. Start by reading the entire recall letter, which will include the defect, how the manufacturer plans to fix the problem and how long it will take to fix, and instructions on what to do next.

More often than not, the first thing you should do is call your dealership and book an appointment with your local dealership as soon as possible. Since the car was recalled, they will fix the issue for free. However, keep in mind, if the repair is big and there are hundreds or thousands of cars that need to be fixed, you could be waiting awhile to get your car back.

As a first-time car buyer, familiarize yourself with Transport Canada. Here, you can stay informed with real-time recalls thanks to their app, and if you find an issue with your vehicle, you can report it here. Once the defect has been confirmed, Transport Canada will notify the vehicle manufacturer and it’s up to the manufacturer to send a letter to drivers.

Now, while the cost of recalls are often covered by the dealership, other repairs are not. This is why you should consider whether a vehicle warranty is right for you.

When choosing your warranty, you have options. New vehicles are already sold with a manufacturer’s warranty, while used vehicles often are not (their warranties have likely expired). Make sure you read all the fine print on any warranty that your car comes with. For example, some warranties require you to take the car back to the dealership for repairs. If you do repairs yourself, your warranty will be void. For new cars, if you fail to properly maintain your car as outlined in your owner’s manual, your warranty will also be void.

It’s important to know the difference between a manufacturer’s warranty and a dealer warranty — there are pros and cons to both. A manufacturer’s warranty is offered by the company that makes the vehicle. Many people opt to stick with a manufacturer’s warranty because vehicle manufacturers are more reliable and are more willing to pay up when there’s a claim. The downside is they are usually only available for newer cars, so if you are buying an older vehicle, you might only have the option of a dealer warranty. A dealership warranty is a third party warranty. They offer more flexibility and coverage because they cover older cars.

Before you agree to a dealer warranty, head online and read reviews about the dealership. See if there’s been complaints about the dealer honoring warranties. If there have, you might be better off skipping one entirely. The Automobile Protection Association recommends that where you can, opt for manufacturer warranties over dealership warranties. Back to top

Resources

If you still have questions or need additional resources after reading this guide, we’ve compiled some helpful websites below related to buying your car.

CARPROOF Vehicle History

https://www.carproof.com/

Transport Canada recall notices

http://www.tc.gc.ca/eng/motorvehiclesafety/recalls-motor-vehicles.html#Stay_informed_about

Canadian Automobile Association

https://www.caasco.com/

Canadian Black Book

http://www.canadianblackbook.com

Auto Insurance Price Index

https://www.lowestrates.ca/feature/auto-price-index Back to top