Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
How to buy your first car in 7 steps
Follow these steps to learn how to buy your first car and get the best fit for your needs and lifestyle.
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:
|Purchase price||$1,000 to $40,000 (on average)|
|Interest rates||Annual APR between 6% and 47%|
|Salex tax||From 5% to 15%|
|Car insurance||$700 to $2,000 per year|
|Scheduled maintenance||$500 to $700 per year|
|Emergency repairs||$50 to $6,000|
|Gas||$50 to $200 per month|
|Registration||$30 to $150 per year|
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
|Seller||Where to find||What to expect|
|Private seller||Sites like Used.ca Kijiji, Craigslist or Facebook Marketplace|
|In-person dealership||Search Google for local dealerships in your area and visit in person|
|Online car broker||Sites such as Auto Trader, Carpages.ca, CarCostCanada and Canadian Black Book|
|Online car buying service||Clutch, Canada Drives or CarDoor|
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
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.
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
More guides on Finder
How to finance your holiday inventory
Get a business loan for your holiday inventory purchases.
Car loans in Ontario
Compare car loans in Ontario for new and used vehicles.
Compare personal loans for Christmas
Compare personal loans for Christmas. Apply online and get your funds within 24 to 48 hours.
Canada Drives vs Clutch vs CarDoor
Compare the top features of 3 online car dealers in Canada: Canada Drives, Clutch and CarDoor.
RBC car loan review
Finance a new or used car and get flexible repayment terms with an RBC car loan.
If you’re thinking of buying a used car in the Greater Toronto Area, check out online car buying platform CarDoor.
Desjardins car loan review
Finance a car or leisure vehicle through credit union Desjardins.
How to sell Solana in 4 steps
Learn how to easily sell Solana (SOL) by following our step-by-step guide and compare 10+ crypto exchanges. Get started today.
Compare Personal Loans
Compare the best personal loans in Canada to finance your next purchase and keep more money in your pocket.
How to finance a Lincoln in Canada
With unique design and modern tech, Lincoln cars are designed to make a statement. Learn how to finance your new ride.
Ask an Expert
You must be logged in to post a comment.