A Guide For The First Time Car Buyer


A First Time Car Buyers Guide

With Covid-19 being as prominent as ever, fewer Canadians are comfortable taking public transportation. Many people are now pondering the idea of buying a car and for many Canadians, it will be their first experience buying a car. 

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Being a first-time car buyer is extremely exciting but it can also be an anxiety-filled experience. You’re excited because of the freedom it brings but also afraid of the challenges that often come with buying a vehicle. Many fear they will be tricked by a car salesman into buying a car they can’t afford or be charged hidden fees. With so many vehicles to choose from, it’s important you have a thorough understanding of the process. You need to decide if you want to lease the car or finance the car. The last thing you want to do is put yourself in a bad spot financially with a car less than perfect for your needs. We know that the car buying process can be a daunting one, but in this article, we hope to tackle all of your concerns and make your car buying experience a great experience.  

young couple in a car

Leasing vs Car Financing

There are three ways to buy a car: you can pay cash upfront, get car financing or lease the vehicle. Being a first time buyer, it can be assumed that you don’t have enough money to pay for a vehicle up front, so we’re going to look at the other two options. 

Car Financing

Car financing means you get a loan from a bank or dealership to help pay for the car. You’ll have to apply for financing and will either be approved or rejected by a lender based on your credit score. The higher your credit score the better, as the lender will see you as a responsible borrower and in turn give you a more favorable interest rate. You’ll need to decide on how long you want the loan term to be, which will dictate how much money in monthly payments you make. The other big factor that determines your monthly payments is if you do a down payment. The great part about financing is once the term is over and you’ve made all of your payments in full and on time, you’ll have full ownership of the vehicle. 

Car Leasing

Leasing a car works much differently and while it’s not usually as practical, it does have its perks. You can think of leasing a car as basically a long-term rental car. You only pay for the vehicle while you have it but you won’t have ownership of the vehicle at the end of it’s term, instead you’ll give it back to the dealership. While leasing is typically cheaper than financing, since you don’t end up with ownership in the end it doesn’t usually make as much sense financially. With leasing, you need to keep the vehicle under a certain amount of kilometres per year as well so if you plan to drive a lot it may not be the best option. Leasing is great for anyone who wants to have a new car with new features and doesn’t care about ownership. For most first time car buyers, leasing doesn’t make nearly as much sense as financing. 

hands on a steering wheel

The 10 Step Decision Process

Let’s take a look at every decision you’re going to take in your car buying journey. It’s critical that you take the time to carefully consider each step so you don’t end up making one bad decision that negatively affects the rest of the process.

1. Figure out your budget

This is probably the most important step of the whole process as it will dictate how the rest of your experience goes. It’s critical that you break down your monthly income, your bills, and other expenses to give yourself an accurate amount you can afford to pay monthly. A good general rule is to never exceed paying more than 10% of your monthly income on a car. To help give you a visual of what your payments will look like, check out our car loan calculator

2. Decide what class of vehicle you need

Once you know your budget, you need to start considering what’s most practical for you. If you’re a carpenter with a ton of gear and own two golden retrievers, although a two-door sports car may look awesome, it’s probably not going to fit your day to day lifestyle. It’s important to find a vehicle that can accommodate your job, your family, or your hobbies instead of just buying the first vehicle you can get a good deal on. If you’re only looking for a commuter to get you around town, you probably don’t want to spend a ton of money on gas fueling your all-wheel-drive truck.

3. Find the best time to buy a car

There are certain times in the year when you’re more likely to find a great deal on a vehicle. Typically in the fall and towards the end of the year, dealers are trying to get rid of their older model vehicles in anticipation of next year’s models. If you’re in a position where you can wait it out a few months and take public transportation, it could potentially save you thousands of dollars. 

young couple with car salesman

4. Narrow down your vehicle options

You know your budget, you know the class of vehicles most practical for your lifestyle, and you know when to buy. Now it’s time to research vehicles that fit your criteria and narrow down your choices. Make sure to check the reliability of the vehicle, the fuel efficiency, and the reviews from other people.

5. Research potential dealerships

So now you’re at the point where you have a pretty good idea of the car you want, but you need to decide who to buy it from. Not all dealerships are the same, some have better incentives, larger inventories, or are just known to have good business practices. It wouldn’t hurt to ask around and check the internet to see what other customers have said about particular dealerships. Once you’ve settled on a few dealerships check their inventories online to make sure they have options in the vehicles you’ve already narrowed down. One thing you’ll want to ensure before you visit a dealership is that they allow test drives, it’s very important you get the opportunity to feel how the car drives before buying it. 

car dealership at sunset

6. Come prepared, ask the right questions

Once you’re at the dealership and being helped by a car salesman, don’t forget to ask all the important questions. You should have written down a list of questions before you walk into the dealership and be sure to go over that list for any cars you consider buying. Some of these questions would be around how well the car was taken care of by its previous owner, has the car been in any accidents, have there been any major repairs, etc. The answers to these questions could make or break the appeal to own a certain car so be careful not no skip over any. 

7. Take it for a test drive

This is the fun part! The part where you really learn whether or not a car is right for you. Try out the car you have an eye for, how does it handle, how does it accelerate and decelerate, is it comfortable to sit in? These are all questions you should be able to answer after about 10 minutes of being behind the wheel. Don’t just try it out around town, take it out on a highway or a bumpy road, use your test drive to take the vehicle to places you often drive. Sometimes, you read all about a car, hear wonderful reviews, love the interior and exterior design, but the second you get behind the wheel you realize: “oh well this isn’t for me, it’s way too big” or whatever other reason may cause you to not like it. On a mechanical note, try and focus if you feel any weird vibrations or hear weird noises as this may indicate potential problems. 

young girl test driving vehicle

8. Get it privately inspected

So, you think you’ve found the one, the car that meets all your criteria and will suit you for the next 5-10 years. Before you pull the trigger and negotiate the price, see if you can have the car inspected by someone other than the dealership’s mechanic. While most dealerships have enough ethics to falsely claim they’re vehicles are in perfect condition, it’s always best to have a third party mechanic verify the vehicle is in great shape. 

9. Negotiate a deal

This can be one of the more stressful processes of the car buying process, especially for first-time car buyers with no real experience in negotiating. It’s important to know that negotiating on a used car versus a new car is completely different. Typically with used vehicles, dealers aren’t willing to adjust pricing much because, in order to keep up with the online market, they need to have fair and competitive pricing. This isn’t to say you can’t make offers based on prices you’ve seen for similar vehicles at other dealerships though. If the vehicle had a major repair two years ago, don’t shy away from bringing that up in the negotiation process. At the end of the process, if you feel unhappy with the number the dealer is fixed on, don’t be afraid to walk away. There are other vehicles at other dealerships that will be just as suited for you as the one you walked away from. Also, there’s a chance you get a call back from that same dealer a few days later willing to meet you at your lowered price. 

young man in front of new car

10. Finalize the sale

You did it! What you may have thought to be a daunting process is now over thanks to your research and due diligence. You should feel good about your purchase and confident it made sense financially. Now it’s time to fill out all the necessary paperwork to finalize the car sale. 

Apply Today

If you’re looking to buy a used vehicle, let Car Loans Canada help you through the process and get you pre-approved for car financing! The first thing you should do is check out our rates page to see the current rates in Canada from all of the top lenders. Now that you have a better idea of the interest rates, plug in your estimated costs and term length to our car loan calculator, where you’ll see a rough estimate of what your monthly payments will be. 

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