How to buy a car in Canada

Buying a car in Canada can be a relatively pain-free process if you know where to start. Learn more about how to buy a car in Canada – including where you can get financing and what steps you’ll need to follow to finalize your purchase.

How to buy a car in seven steps

The best way to buy a car in Canada is to follow this step-by-step process:

1. Calculate how much you can afford

Before you begin your search, calculate how much you can afford to spend on your car. Ideally, the amount you spend on a car should be determined these three factors:

1. Down payment. Think about how much you can afford to put down upfront on your new car. Keep in mind that the more you can spend on a down payment, the less you’ll pay in interest and the lower your monthly payments will be.
2. Monthly payments. Make a budget to find out how much you can afford to pay for your car each month. Many experts agree that you should avoid spending more than 10% of your take-home pay on your monthly payment.
3. Other car ownership expenses. You’ll want to consider other costs that come with car ownership, such as insurance, gas, maintenance and registration fees. A good rule of thumb is to spend less than 15% of your annual income on all vehicle-related expenses combined.

2. Narrow down your options

The best way to buy a car in Canada is to narrow down your options in advance. Think about the following features to get a clear picture of what you want in a vehicle:

1. Price. Set a budget and stick to it. This will help sort out which cars you can truly afford and which are out of your price range.
2. Vehicle type. Think about what type of vehicle will suit your needs – whether that’s a compact car, SUV, pick-up truck or minivan.
3. Condition. Figure out if you want to buy a new car with lower kilometres and a warranty or a used car with fewer upfront benefits but a lower price tag.
4. Fuel type: Consider the length of your commute and decide whether you’re looking for a gas-powered vehicle or a hybrid/electric car.
5. Manufacturer: Decide on which car brand you want to buy. If you’re not sure – find out which car brands have a solid reputation before you hit the dealership.
6. Mileage: Figure out how much mileage you’re willing to live with when buying a car. Remember that higher mileage may mean more repairs while lower mileage vehicles will typically cost more upfront.
7. Extra features. Decide which premium features you want in advance. These can include Bluetooth, power windows, a sunroof and back-up cameras.

• Buying a new vs used car in Canada

  	New Car	Used Car
  Price	Costs more and depreciates immediately	Costs less and retains its value longer
  Add-on options	Lots of options that you can customize to your needs	You’ll face a limited selection depending on your location
  Watch out for	Expensive sales tactics	Poorly maintained vehicles or “lemons”
  Financing options	More options with lower interest rates	Fewer options with higher interest rates and more stringent requirements
  Information available	Manufacturer stickers, dealer documentation and up-to-date reports	Typically general information only, and private sales may have none; companies like CARFAX may be able to provide a vehicle history report
  Warranty	Manufacturer and dealer warranties are available	Varies depending on the age and condition of a car; new car warranty may still be in effect or the dealership may have extended warranty options available

3. Shop around for the best price

When you’ve settled on the type of vehicle you want, the best way to buy a car in Canada is to compare prices across multiple sellers. You should also know what the base price (also called the Manufacturer Suggested Retail Price, or MSRP) of the car is on the manufacturers website and what it’s selling for on reputable sites like Canadian Black Book, Auto Trader Canada, and Kijiji Autos.

Doing this kind of research can also help you decide whether to purchase your car directly from a dealership or from a private seller.

• Where to buy a car in Canada?

  You can look into the following options when thinking about how to buy a car in Canada:

  • Dealerships. You can get a new or used car from a dealership and test drive several cars to find the best fit. Dealerships let you compare several cars at once and you may also be eligible for dealership financing when buying a car. You can also ask about demo models if you want to save a few dollars.
  • Private sales. You may be able to save money if you purchase a used car from a private seller. This involves searching for a car on a site such as Auto Trader, Craigslist or Facebook Marketplace. Just make sure you get an inspection on the car in advance to make sure you’re not buying a lemon.
  • Imported cars. Importing a vehicle is typically more expensive but may be a good option if you have a specific model or brand in mind that it’s difficult to find in Canada. Find out the steps for importing a car to Canada – and make sure to keep an eye out for extra expenses and customs fees.
  • Car auctions. Buying a car at an auction can be a very affordable way to get a new vehicle. The downside is that the quality of auctioned vehicles can vary, so there’s a certain level of risk involved in buying a car – especially if you buy it in “as is” condition.

4. Find car financing

If you’ve figured out how to buy a car but aren’t sure how to finance your purchase, you have the following options.

• Car loan. You can take out a car loan to buy a car, and some lenders may even give you lower interest rates when you secure your loan with the vehicle you purchase.
• Home equity loan. If you’ve built up enough equity in your home, you could use that money to finance your car. Just be aware that your house will be used as collateral to secure your loan.
• Unsecured personal loan. If you have good credit, you may be able to buy your car with an unsecured personal loan. This means you won’t need to use your new vehicle as collateral to secure your loan.
• Dealership financing. You may be able to apply for financing directly from the dealership if you want an easy and convenient loan. Just be aware that you could end up paying more in interest and fees if you don’t compare your options.

Compare your car loan options

Check out reputable car loan providers in the table below and compare providers side-by-side by checking the compare box under each provider you’re interested in.

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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		0% - 31.99%	$500 - $35,000	24 - 120 months	Requirements: Min. income of $1,800 /month, 3+ months employed	0% financing applies to some new models with loan terms up to 60 months. Offer ends March 31, 2023.	Go to site More Info	Compare	loading Fetching your data...
Canada Car Loans Canada Car Loans		1.49% - 31.99%	$7,500 - No max.	12 - 96 months	Requirements: Min. income of $1,900 , 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...
Splash Auto Finance Splash Auto Finance		9.90% - 31.00%	$5,000 - $50,000	24 - 84 months	Requirements: Min. income of $2,200 /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.Test drive your vehicle and get an inspection

Before buying a car in Canada, you may want to get it inspected by a licensed mechanic. It’s also a good idea to test drive a vehicle before you buy it to find out if there are any noticeable defects. Some dealerships will offer an inspection or a 30-day warranty on the vehicles they sell. Private sellers can be a little bit more hit or miss when buying a car.

• What to check during a visual inspection

  • Exterior. Check for signs of an accident, such as dents, scratches, chipped paint or mismatched paint on vehicle panels (indicating they’ve been painted over). You’ll also want to check your windshield for cracks and make sure the tires have minimal wear and are still in good shape.
  • Interior. Look at the condition of the upholstery and double-check that there are no rips or tears. Make sure all of the electronics in the car are functioning properly, including the air conditioning, radio, sunroof and back-up camera. You can even go so far as to lift the floor mats to make sure there are no signs of damage.
  • Engine. Check the surface of the engine and under the vehicle for oil residue or other noticeable issues. You’ll also want to make sure that the engine holds up well during a test drive.

• What to check during a test drive

  • Start the car and let it idle. Listen for strange engine noises and make sure the check engine light is off.
  • Drive the car in a low-traffic area. Make sure the brakes don’t feel spongy or loose and take some hard corners on both sides to make sure there are no noises in the wheel wells and the car can turn without resistance.
  • Drive on a highway. Make sure you can accelerate with no issues and that the car doesn’t drift from side to side. You may also want to find a hill to make sure upshifting and downshifting works properly.
  • Check lights and accessories. Make sure your headlights, signal lights, interior lights, windshield wipers, speedometer and other parts of your vehicle are working properly.

6. Negotiate

Look at the price of similar vehicles with similar mileage to get an idea of how much you should be paying for your vehicle. You can find this information by searching on sites such as the Canadian Black Book and autoTrader.ca.

• Dealerships. With dealerships, you can ask them to price match or see what their lowest price would be on the vehicle you’re interested in. Most dealers are interested in moving stock and many may give you a lower price to expedite a sale.
• Private sellers. For private sellers, you may want to reference ads for similar cars with lower price tags when sending out inquiries. You might also be able to lock in a cheap sale if you promise to buy the car outright with cash on the same day.

In both cases, it helps to apply for car loan pre-approval with a lender so that you know how much money you have to spend before you start shopping.

5 tips for negotiating with a car dealer

7. Read and sign the contract

Read through your purchase agreement carefully before you sign on the dotted line. Unless you pay for your car outright, you’ll usually have a financing agreement to sign as well. Double-check that you understand all of your rights and responsibilities before you complete your transaction, and know what red flags to look out for. If you have any questions, ask your dealer to explain the terms of your agreement before buying a car.

Fees when buying a car in Canada

You may have to cover the following expenses and fees when buying a car in Canada.

• Sales tax. You’ll usually pay GST and HST on your vehicle if you’re buying from a dealership or through a private sale.
• Documentation fees. These fees only apply to dealership vehicles and they usually cover administrative fees to file your contract.
• Insurance and registration fees. You’ll need to pay insurance and registration fees when buying a car in Canada. You’ll also have to pay a monthly premium to maintain your insurance.

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Benefits of buying a car

• Easier to get around. You won’t have to plan your day around public transit or car-share schedules.
• Saves time. It takes only a few minutes to zip out for groceries or get to the office if you’re in a rush.
• Travel long distances. You can take an impromptu trip or work and study further from home as the commute will be manageable.
• Financing helps build credit. You may be able to use your car loan to build your credit score if you make your payments on time.

What to watch out for

• Paying too much. Avoid paying too much for your car by searching for online price estimates for the vehicle you’re interested in before you buy.
• High interest rates. Compare lenders to avoid paying too much on interest when you take out financing for your new car.
• History of accidents. Request a CARFAX report and get an inspection before buying a car to make sure it hasn’t been in any accidents.
• Extra expenses. Assess the fees when buying a car in Canada and think about extra costs such as insurance, maintenance and gas.

What are my alternatives to buying a car?

Adopting a car-free lifestyle can help you save money and reduce your carbon footprint. Consider the following alternatives to owning a car:

• Walking. You may be able to walk to nearby grocery stores and restaurants if you live in an urban area or walkable neighbourhood.
• Biking. You can bike in most large cities and it can sometimes be quicker than taking the car if you live in a city with busy or congested traffic.
• Public transportation. Take the bus or metro to get around with less effort but be prepared to pay daily or monthly fees to get around.
• Taxis or rideshare services. Call a taxi, Uber or Lyft if you need to take a short trip and don’t mind paying a $10 to $20 bill.
• Car-sharing companies. Look up a car-sharing company in your city if you want to access a vehicle and have $20 to $50 to spare (plus initial registration fees).
• Rental cars. Rent a car for longer trips but be aware that this option can sometimes cost between $50 and $200 per day.
• Carpooling. You might want to ask a coworker about carpooling if you take the same ride to work every day.

Bottom line

Procuring a vehicle can be easy if you know where and how to buy a car. Find out the best way to buy a car in Canada in seven simple steps, and compare lenders to find a financing option that suits your needs.

Frequently asked questions about buying a car in Canada

• Should I buy a new or used car?

  It depends on your preference. Used cars will often be cheaper upfront, but may cause issues down the line if they haven’t been properly maintained by previous owners. New cars lose a portion of their value as soon as you drive them off the lot, but they typically come with a warranty and fewer maintenance costs in the first few years of ownership.

• How much should I save for a down payment?

  Many experts recommend that you save between 10% and 20% of a vehicle’s purchase price to put down as a down payment. This will reduce your monthly payments, reduce the amount of interest you pay and help you pay off your loan faster while increasing your chances of getting approved for financing.

• What sort of credit do I need to buy a car?

  There are car loans for people with every type of credit, but lower interest rates are typically reserved for people with high credit scores and solid payment histories. If you’re worried about not getting a loan because of past credit problems, consider finding a cosigner for your car loan or securing your loan against an asset to get lower interest rates.

• How can I calculate the cost of owning a car?

  You can calculate the cost of owning a car by adding up your monthly car loan payments as well as fees you’ll pay when buying a car in Canada. These include insurance premiums, gas costs and maintenance expenses. Use our car loan calculator to get an idea of how much your monthly loan repayments might be