Canadian Car Buying Guide

We’re midway through 2021 and now is the time when many Canadians will decide it’s time to buy a car. If you’re one of those people who are in the market to buy a car, do you know all the things that you need to consider before buying? If so, go ahead and close this car buying guide, if not, read on because we’ll explain everything you need to know and consider about buying a car in 2021!

Three Things to do and Look for in a Car

Whether you’ve decided to buy a new or used car, there are three things you need to do and consider before buying. 

Make Lists: With large investments like buying a car, make a list of the things you want out of the vehicle you choose and a list of vehicles you’re interested in. An example of what you may need in a car is one that has room for 5 passengers and all-wheel drive capabilities. For the second list of vehicle options, it’s important to narrow down your list of potential vehicles based on how they’re going to fit your lifestyle. 

Research Reliability: The next factor you need to consider is how reliable the vehicles are that you’re considering. Google the vehicles you’re looking at and see what people are saying about them. Are you noticing a lot of people mentioning the same problems? If that’s the case, it may be a good idea to avoid the vehicle. Ideally, you find a vehicle that requires little maintenance and is known for its long-term reliability.

Value: Last but not certainly not least, is the vehicle of good value? Ask yourself what you’re getting out of this vehicle at the given price compared to the next vehicle. Are the additional features worth the extra costs or are you more paying for the name brand? Do you really need a Bose sound system or should you be more concerned about the vehicle’s safety features because you have a family of 5? 

‍To Buy a New Car or Used Car

One of the first things you’ll need to decide is whether it makes more sense to buy a new car or a used car. We have a whole blog to help guide you through this decision, but first, we’ll talk about a few of the pros and cons of both. 

Buying a New Car: Pros and Cons

Pros:

• No maintenance worries with a new car due to the warranty
• The car will be in perfect mechanical shape
• Newest technology features
  

Cons:

• More expensive
• New cars depreciate much faster than used cars
  

Buying a Used Car: Pros and Cons

Pros:

• Can save a lot of money by buying a used car
• It’s already passed its most significant period of depreciation
• You may be able to afford a model that you wouldn’t be able to afford if it were new
• Warranty may be transferable from the previous owner
  

Cons:

• A used car may need repairs
• The vehicle may be out of warranty
• You may be unknown to the car’s history and how it was treated

‍Three Things to Look for in a Car Dealership

Choosing a car dealership to buy from can be stressful. We’ve all heard of dealerships that are known for their “shark” sales tactics and will give up integrity and honesty for a sale. But if you look for these three things, you should be able to decipher the unethical dealerships from the honest dealerships. 

Great Reputation: The most important part of finding a great dealership is to find one with a great reputation. If you look online and see complaint after complaint about similar issues, it doesn’t matter how great their inventory is or if they have a good business philosophy, you should probably stay away. Find a dealership with solid online reviews. You will undoubtedly find a few bad reviews but that’s the case with just about any business so take them with a grain of salt.

A Good Business Philosophy: One thing to add to having a great reputation is if they have a good business philosophy. While most companies preach how great their customer service is, look for traits like helping out in their community or emphasizing the importance of honesty and integrity. If you see that a dealership has been really active in the community it shows they care about the people they sell to and therefore are probably honest people to work with. 

Large Inventory: Once you’ve found a few dealerships with great reputations and a good business philosophy, you need to consider which one has the best inventory. You may be looking for a particular model or style of vehicle and one dealership may have more options than the other. It’s always a bad sign if you notice a dealership has a limited inventory, so keep your eyes out for dealerships that have a large inventory.

‍All of the Factors Involved With Budgeting

One of the most important factors for Canadian’s buying cars is the affordability of the car. But when making a budget you need to consider more than just the actual sticker price of the vehicle. Below will be a list of all the other cost factors you need to incorporate when making your budget.

Sticker Price: The actual sticker price is usually going to be financed over a few years, but it’s still important to negotiate this number down as low as possible to keep your monthly payments as small as they can be. Depending on if you buy new or used, there will be additional fees and taxes. 

Down Payments: If you can afford to make a down payment on the car you want to finance, you should. Making a down payment does two great things for you. First, it lowers your monthly payments because you’re asking the lender for a smaller loan. Secondly, it will likely result in a lower interest rate because you’re asking the lender for less money, decreasing the risk in the eyes of the lender. 

Monthly Financing Payments: You need to know how much you can afford to pay towards your car each month. The monthly payments are determined by the length of the term, the price of the car and the interest rate. Use a car loan calculator to play with the numbers and see how different changes will affect the monthly costs. 

Car Insurance: For you to drive legally in Canada, you need to have car insurance. The costs of insurance vary on the car model and your driving history. Get a quote for a few different cars so you can more accurately estimate your total costs.

Fuel Costs: Unless you decide to buy an electric car, there’s no escaping the costs of fuel. Try to find a vehicle that has good fuel economy even if it means a higher sticker price because, in the long run, it could save you money.

Maintenance Costs: Living in Canada, you’re going to need winter tires to be able to safely navigate our rough winter roads. Incorporate the costs of tires and also the costs of getting your oil changed every 5,000km or so. 

Repairs: The last thing you need to consider is the cost of repairs. While we all hope we can stay out of the mechanic’s garage, eventually there will come a time where you need repairs done so make sure you’re prepared financially to handle these costs. 

‍Car Loans: Everything You Need to Know

In order for you to get a good deal on a car loan, you need to understand everything that makes up a car loan. We’re going to break it down into five different sections so you have a better understanding of where you stand. 

Credit Score: Your credit score is an indicator of how responsible you are for handling your credit finances. If you’ve always paid your bills on time and in full, you should have a good credit score. If you’ve missed payments or had items repossessed, your credit score is going to take a negative hit and lenders will want to avoid giving you loans. The better your credit score, the less risk the lenders see you as a borrower and in turn, the better financing terms you’ll be able to qualify for. 

Principal Cost: The principal cost is how much money you’re requiring the lender to give you for the car loan. Your monthly payments go towards both the principal costs and interest rate. 

Interest Rates: The interest rate is the cost of borrowing money. Ideally, you want the lowest interest rate possible, but this is entirely dependent on your credit score. The better the credit score, the better the interest rate you’ll be able to qualify for. 

Monthly Payments: This is the amount you’ll have to pay towards your loan each month to pay for your car loan. This payment is made up of the principal loan as well as the interest rate. You may be able to refinance your loan if you continually make payments and improve your credit to get a better interest rate. 

Loan Term Length: This is the length of time you’ll be paying off the loan. The longer the term, the smaller your monthly payments will be, but the interest rate will be higher. Typically it’s recommended that you keep your term under six years to avoid getting negative equity on your car. 

Extended Warranties on Cars

If you’re worried about needing a major repair on your vehicle, you may want to consider purchasing an extended warranty to put your mind at ease. While these can be costly to purchase, it could potentially save you a lot of money if something were to go wrong. Although it should be noted that most Canadians regret buying an extended warranty due to the fact that they never had to use it. Ultimately, the choice is yours on whether to opt-in or out of an extended warranty but you should definitely consider it if you want peace of mind. If you decide to opt out, put some money aside for repairs in case they come up. 

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