by Prepare For Canada | Oct 15, 2024

If you’re a newcomer thinking about buying a new car in Canada, the auto market offers a wide range of vehicles to meet different financial situations, lifestyles, and driving habits. If you’re in Canada from a country with a smaller auto market and fewer choices, this can be daunting as you begin your search. Buying a new car is often the second most expensive purchase after buying a home. So it’s worth it to do some research to determine what kind of vehicle will suit your needs.

But before you buy a new car, it’s a good idea to consider if you even need a new car. Most large cities like Vancouver, Toronto, Calgary, and Edmonton have extensive public transit systems. Public transit allows you to move about cost-effectively and conveniently. Or you can even consider buying a used car. However, if you still want to buy a new car here are some important things to do and think about.

Talk to people who own the make and model of the car that you are interested in buying. That way you can get first-hand knowledge about their experience. Their insights about reliability, repair costs, and gas mileage can be helpful information that can save you money. Also, don’t be invested in brand loyalty too heavily as the quality gap between domestic and import brands has narrowed in recent years.

You can also research Canadian automotive websites that are full of reviews and road tests for all types of vehicles. Specific factors to research include:

• Cost

• Performance

• Features

• Fuel economy

• Warranty

• Reliability

• Running costs

• Depreciation and eventual resale value.

Be sure to evaluate how the car you want to buy compares to the competition’s price.

Before buying a new car it’s worth knowing how you can get the best price for your new vehicle. Here it’s important to the difference between the suggested retail price (SRP) and the dealer invoice price.

The MRSP is also commonly known as the list price or “window sticker” price. This is the price point that new car dealers work from. In many cases, you can negotiate a lower cost. However, if the car is in high demand, it may sell for more.

This is the actual price the dealer pays the manufacturer for the vehicle. And there is usually some variance. The price margin is important as it tells the new car buyer how much profit the car dealer can make on the sale of the car and help you negotiate a lower price.

Car dealers commonly offer special promotions, factory/dealer rebates, and other incentives to increase car sales. Find out when manufacturers and dealers offer these programs before buying a car as you could make big savings.

There are different Canadian automotive websites that show what manufacturers and dealers are offering incentives and for what models. Also, some good times to look for and buy a new car include:

• Slow sale periods in the winter

• End-of-year inventory clearances, and

• End of the month when a car dealer is making way for new models.

Car dealers will offer other incentives to new car buyers such as no interest payments, low financing rates, attractive leasing rates, and cash rebates.

Before you buy a car, it’s important to take a test drive. The car dealership will allow you to take a half-hour test ride on urban and highway roads so you can get an idea of how the vehicle drives and feels. If a spouse will drive the car, ensure they come along for the ride to use the controls, explore the features and evaluate the vehicle. . You can also bring the family to test out the back seat room!

Another helpful way to take a test drive is to rent the make and model you’re considering buying. That way, you can drive the car for a longer period of time to experience the car and its benefits. Or, you may discover that the vehicle doesn’t meet your needs. Either way, a test drive is an important first step to take before buying a car.

When buying a car, you have two types of financial agreements to consider: buy or lease a vehicle.

Whether you choose to lease or buy a car, you’ll have a monthly, weekly, or bi-weekly car payment for a few years, unless you pay cash. Typically, most car-buyers put down a deposit on a car and get a loan from a bank to buy it. In which case, you’ll also have to pay interest on the loan.
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The other option is to lease a car. When you lease, you don’t own the car. You are essentially renting it for a specific period. At the end of the lease term, you will have the option to return the vehicle, trade it in for a newer model, or buy it out. 

With a lease, instead of borrowing the full purchase price of the car, you are only borrowing the amount the car will depreciate over the term of the lease. For example with a three-year lease, and taking into account regular wear and tear (known as the “residual value”), then you only have to finance the difference between the purchase price and the residual value.  This is the basic reason lease payments are lower than loan payments.

Both leasing or buying a car has pros and cons. When you buy a car, you own the car at the end of the payment period – you own the car fully and it has some residual value and equity. The cons are that payments are more expensive than leasing and once the vehicle is out of its warranty period you are responsible for maintenance and repair costs.

When you lease a car, you have lower car payments and better cash flow. And since car leases are generally between two and three years, the vehicle you buy is almost always going to be covered by warranties.  Once the lease is up, you can either walk away or upgrade to a newer model. However, unless you negotiate to buy the car at the end of its lease you will never really own the vehicle and will not build equity.