How To Buy A Car in Canada

Are you buying a car in Canada? There’s a lot to consider, and a seemingly endless amount of options to sort through. We’ve broken down the process into seven simple steps to help get you from the starting line to the driver’s seat.

Key Takeaways

• Determine Your Budget: Assess how much you can afford, keeping expenses under 20% of your monthly income.
• Decide Whether To Buy, Trade, or Sell: Evaluate your current vehicle’s value and options.
• Explore Multiple Options: Consider at least two car models to compare factors like safety, size, and fuel economy.
• Research Extensively: Use online reviews, friends’ opinions, and pricing knowledge to prepare for negotiations.
• Be Smart About Test Drives: Focus on key features like trunk space, parking ease, and family comfort.
• Inspect Used Cars Thoroughly: Use CARFAX reports and pre-purchase inspections to uncover any issues.
• Seal the Deal With Confidence: Verify all details before finalizing your car purchase.

How Car Pricing Works

MSRP Explained

MSRP or Manufacturer’s Suggested Retail Price, is the baseline price set by the manufacturer. It’s a starting point for negotiations and doesn’t include taxes, fees, or additional features. Most car dealerships list this price on their websites, but buyers often secure discounts during negotiations. Understanding how the MSRP differs across regions or during sales events can also help you plan your car purchase more strategically.

Down Payments

A down payment reduces the total amount financed and lowers monthly payments. Experts recommend putting down at least 20% for new cars and 10% for used cars. A higher down payment can also help you avoid costly interest over the loan term. Additionally, a strong down payment may open doors to better car loan terms or lower overall costs, especially for first-time buyers.

Negotiating Car Prices

Negotiation is an essential part of the car-buying process. Research the car’s average market value before visiting a dealership to strengthen your bargaining position. Be prepared to walk away if the price doesn’t meet your expectations. Leverage quotes from competing car dealerships to push for a better deal. Remember to negotiate additional features like extended warranties or service packages, as these can often be included at a lower cost during negotiations.

Manufacturer Incentives

Car manufacturers often offer incentives such as cashback, loyalty programs, and financing deals to attract buyers. These promotions can save you thousands, so be sure to ask about available offers when shopping for a new car. Timing your car purchase to align with these incentives can make a significant difference in the overall cost.

Buying New Vs. Used

Buying a new car gives you access to the latest technology, a warranty, and peace of mind knowing the car’s history. However, new cars depreciate quickly, losing up to 30% of their value in the first year. This rapid depreciation means that your investment loses value faster, which can be a concern if you plan to sell it or trade it in within a few years.

Used cars, on the other hand, are more affordable upfront and depreciate at a slower rate. However, they may require more maintenance and lack the warranty coverage of new vehicles. Certified pre-owned programs offered by many car dealerships bridge this gap by providing inspected, warrantied used vehicles, combining cost savings with peace of mind. Consider your budget, lifestyle, and long-term plans to decide which option is best for you.

Best Times To Buy A New Car

Timing can significantly impact the price you pay for a new car. The best times to buy a new car include include:

• End of the Month: Salespeople aim to meet monthly quotas and may offer better deals.
• End of the Year: December is an excellent time as car dealerships clear out old inventory to make room for new models.
• Model Changeover Periods: When new models are released, dealerships often discount the outgoing versions.
• Holiday Sales Events: Watch for promotions during major holidays like Boxing Day and Canada Day.

Another pro tip is to shop during weekdays rather than weekends when dealerships are less crowded, allowing salespeople to give you more attention and potentially better deals.

Our 7 Steps To Buying A New Car

Step 1: Determine your budget.

When you know exactly how much you can spend, it will make starting your search that much easier. Experts recommend that your total vehicle expenses (including payments, insurance, and fuel) should make up no more than 20% of your monthly income. You can use our online calculator to factor in interest rates, taxes, and potential insurance costs to refine your budget.

Step 2. Determine If You Want To Buy, Trade, Or Sell

If you already have a car and are looking to upgrade, consider these options:

Trade-In: Do your homework to see what your vehicle is worth before going to a dealer to negotiate a trade-in.

Private Sale: There are lots of options online to sell your car for cash before pursuing a new investment. Try Auto Trader or Kijiji.

‍Keep Your Current Vehicle: Sometimes, retaining your old car as a backup or secondary vehicle makes sense.

Evaluate the convenience and financial benefits of each option. For example, trade-ins are quicker but often yield less money than a private sale.

Step 3: Begin Looking At Your Options

Don’t just zero in on one kind of car – always start with at least two makes in mind. This will allow you to compare important factors across the automotive spectrum.

List your most important criteria and check each option against them. These could include:

• Safety Ratings
• Size
• Power
• Appearance
• Fuel Economy
• Seasonal Performance

If you’re looking at a used car, you should also consider the model year and the kilometres on the odometer.

4. Research As Much As You Can

Once you’ve narrowed your search, gather as much information as possible:

• Ask friends and family for opinions and experiences.
• Read online reviews and forums.
• Check listings on dealership websites and platforms like AutoTrader to understand price ranges.

Arming yourself with knowledge will give you confidence during negotiations. Make sure to explore local dealership promotions and inquire about price-matching policies to get the best deal.

TIP: For a short list of helpful websites, check out our article on the best car buying sites in Canada.

Step 5: Be smart about your test drive.

When test-driving a car, don’t let shiny features distract you from evaluating the essentials. Focus on aspects like:

• Backup camera and parking sensors
• Trunk space and interior comfort
• Ease of parallel parking

Test drive for at least 20 minutes. For an extended experience, consider renting the same model from a car rental service for a day. During the drive, pay attention to how the car handles different road conditions and whether it meets your daily driving needs.

TIP: For an even better test drive experience, check to see if a car rental company has the model you’re interested in, and drive it around for a day or two.

Step 6: Take a more in-depth look at a used car.

If the vehicle you’re considering is used, there are a few ways to get a glimpse at its background and any potential issues:

• CARFAX Report: This provides details on the car’s history, including past owners and accidents.
• Pre-Purchase Inspection: Have a trusted mechanic evaluate the car to spot hidden problems.

Additionally, look for vehicles with maintenance records and low mileage, as these often indicate a well-cared-for car. Avoid cars with significant rust or signs of neglect.

Step 7: When you’re happy, seal the deal.

When you finally have the perfect car and a fair price in your sights and have carefully inspected the fine print on your deal, it’s time to make things official.

Give the car a final once-over to ensure there have been no damages since you last saw it. Have the salesperson explain any special features, especially if it’s a new car with the latest technology. Then get ready to ride into the sunset in your new vehicle!

Looking To Finance Your First Vehicle?

Buying a car can be exciting, but financing your first vehicle may feel overwhelming. Whether you’re buying new or used, understanding your options is essential. Many dealerships offer in-house financing, but it’s wise to shop around for the best interest rates and terms. Banks and credit unions often provide competitive car loan options tailored to first-time buyers. Be sure to understand the terms, including interest rates, repayment periods, and any additional fees. Building a solid credit history beforehand can also improve your chances of securing favourable loan terms.

Ready to get started? Contact us today to learn about financing options and take the first step toward owning your dream car!

At Birchwood Credit Solutions, we are part of the largest car dealership network in Manitoba, Birchwood Automotive Group. This means we have a huge inventory of new and used cars, trucks, vans and SUVs. Explore our entire listing of inventory.