How to buy your first car in 7 steps

You’ll need to take certain steps when buying your first car to find the right fit. Learn more about the process for how to buy your first car – from picking the vehicle you want and getting an inspection to locking in financing and signing the bill of sale. You can also learn more about how to find a car loan that suits your budget, even if you have bad or no credit.

7 steps for how to buy your first car

Follow these steps for how to buy your first car and get a head start in the process:

1. Figure out your budget

Think about your current income and debts to figure out how much wiggle room you have in your budget. When doing the math, you’ll want to factor in the purchase price of your car as well as any other costs that may add to your overall expenses. These can include expenses like gas, insurance, repairs, loan interest and sales tax for your province.

As a general rule of thumb, you should aim to spend only 10% to 15% of your net income on buying your first car. Learn more about how much you should spend on your first car.

How much should you pay for your first car?

Think about the costs outlined in the table below when buying your first car to make sure you set a realistic budget:

Actual costs will vary based on factors such as the type of car you drive, your driving record and your province of residence

2. Pick the type of car you want

Decide what type of vehicle will work for your lifestyle and day-to-day commute. Some people can get away with having a small car while others may need a larger utility vehicle for work or to haul kids or pets around. Think about what you might need your vehicle for and research reliable car manufacturers with good safety scores to find the best car for your needs.

What to look for when choosing your first car

• Low mileage. Look for low mileage (anything below 120,000km) to avoid dealing with wear and tear repairs when buying your first car.
• Solid reputation. Check the make and model of the vehicle and make sure it has good customer reviews and no history of recalls.
• Fits your lifestyle. Consider features such as safety ratings, storage capacity, gas mileage and premium extras to make sure you get a car that fits your needs.
• Below market value. Avoid paying more than market value when buying your first car and try to negotiate your seller down if you think the car is priced too high.
• Passes a VIN check. Check the vehicle identification number to make sure the car you want is registered to the seller and hasn’t been in any accidents.
• Performs well in test drive. Take the car for a test drive and schedule an inspection to make sure everything is in good working order before you buy.

3. Decide where to buy your car

You have plenty of options for where to buy your first car – depending on whether you want a new or used vehicle. There are 4 main types of sellers that you may want to think about when figuring out where to shop. These include private sellers, car brokers, online car buying services and dealers.

Where to shop when buying your first car

4. Decide how to pay

You can choose to pay for your first car with savings or apply for financing to cover the costs. There are several different forms of financing available, even if you’re buying your first car with no credit or bad credit. You may also want to consider leasing a vehicle if you want a new car but can’t afford to buy it outright.

In any case, you should aim to get pre-approved for financing so you know how much you’ll have to spend when buying your first car before you start shopping.

Different ways to pay when buying your first car

You can cover the costs of buying your first car in the following ways:

• Pay with your own savings. Use money you’ve already saved up to cover the cost of a vehicle if you don’t want to take out a car loan.
• Take out a car loan. Apply with a bank or private lender to get a car loan if you want to pay off your car in monthly instalments (plus interest) over time.
• Apply for dealership financing. Get financing directly from the dealership when buying your first car to avoid applying for external financing (but expect to pay more).
• Lease your vehicle. Apply for a lease if you buy from a dealer and don’t want to own your car outright at the end of your contract.

Compare car loans when buying your first car

Sort by:

Name	Product	APR	Loan Amount	Loan Term	Requirements	Long Table Description
CarsFast Car Loans CarsFast Car Loans		4.90% - 29.90%	$500 - $75,000	12 - 96 months	Requirements: Min. income of $2,000 /month, 3+ months employed		Go to site More Info	Compare	loading Fetching your data...
Loans Canada Car Loans Loans Canada Car Loans		2.00% - 46.96%	$500 - $35,000	3 - 60 months	Requirements: Min. income of $1,800 /month, 3+ months employed		Go to site More Info	Compare	loading Fetching your data...
Canada Auto Finance Canada Auto Finance		4.90% - 29.95%	$500 - $45,000	3 - 96 months	Requirements: Min. income of $1,500 /month, 3+ months employed		Go to site More Info	Compare	loading Fetching your data...
Ontario Clutch Car Loans Clutch Car Loans	Ontario	From 8.49%	$7,500 - No max.	12 - 96 months	Requirements: 3+ months employed, Max.1 bankruptcy, Ontario & Nova Scotia only		Go to site More Info	Compare	loading Fetching your data...

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5. Compare cars and negotiate prices

Take some time to compare different vehicle types and sellers before deciding which car to buy. You’ll want to search for a car that’s at or below market value and is in good condition. You can usually haggle with dealers and private sellers to drive the price down even further if you come equipped to negotiate.

Tips to negotiate prices for your first car

• Know how much you can spend in advance. Get pre-approved for financing in advance to show that you can only spend a certain amount.
• Price match in advance. Look online for lower-priced vehicles with same mileage/condition from other sellers to negotiate the price of your vehicle down.
• Make a reasonable offer. Make sure you know what a fair market price is and avoid driving the price down too far.
• Remember the sales tax. Look into how much sales tax you’ll have to pay based on your province of residence and ask if the seller can take this off the purchase price.
• Know when to walk away. Decide what the maximum amount is that you can spend and don’t go over that amount under any circumstances

6. Schedule test drives and inspections

Test drive the car you want to buy to check for noticeable defects or obvious signs of wear and tear. You may also want to schedule an inspection with a licensed mechanic to make sure the car is in good working order. With a dealer, you should schedule an external inspection instead of relying on an in-house mechanic where possible.

It’s also a good idea to check the vehicle identification number with a company like CARFAX to make sure the car hasn’t been stolen or involved in a crash.

7. Sign your contract and organize the paperwork

Once you’ve settled on a car, you’ll need to pay the seller and sign any necessary paperwork. The seller will then sign the car title over to you and give you the documents you need to register your new vehicle. From there, you’ll go to a car registration/insurance company in your province to get your car ready for the road.

What you’ll need to register your first car

You may need the following documents to register and insure your first car:

• Government-issued ID. Show your licence, passport or other government proof of ID.
• Transfer form. Complete a transfer form and pay sales tax on the vehicle sale, depending on which province you live in.
• Original vehicle registration. Provide a signed copy of the vehicle registration from the previous owner.
• Bill of sale. Complete a bill of sale to verify your purchase of the vehicle if required by your province.

How to buy your first car with no credit or bad credit

The steps for how to buy your first car with no credit or bad credit will be similar to those listed above. The main difference is that you could have difficulty getting financing if you’re buying your first car with no credit or bad credit.

To improve your chances of qualifying for financing, you may want to apply for a loan with a cosigner who has good credit. It could also make sense to use some form of collateral to secure your loan (such as another vehicle or your home). Read our full guide to getting a car loan with bad credit to learn more.

Bottom line

There are a few simple steps you can take to find the best deal when you buy your first car. This includes figuring out what type of car you want, comparing lenders and finding financing to pay for your car. Learn more about how buying a car works and compare your loan options to find the best financing for your needs.

Frequently asked questions for how to buy your first car

• When should I buy my first new car?

  You should buy your first new car when you can afford it and when you’re ready to take on the responsibility of owning a vehicle. It might also make sense to buy a car if you have a longer commute, or there are inadequate public transportation options available for you to get around.

• What do I need to know before I buy my first car?

  You should know what type of car you want, where you’re going to buy it and how you’re going to pay for it. You should also be willing to follow the steps for how to buy your first car outlined above to make sure you find the right car for your needs.

• Should I buy a new or used car?

  It depends on your preference. Buying a used car can save you money but it may come with higher maintenance costs. Buying a new car comes with a higher price tag but you may get a warranty and you’ll often spend less on repairs in your first few years.

• Do I have to make a down payment?

  No, most lenders don’t require a down payment, but that doesn’t mean you shouldn’t make one. Making a down payment can show lenders that you’re responsible enough to save money. It also lets you pay less interest because your loan will usually be smaller.