.New to Canada and looking for a car? In this article, we go through the basic steps of how to buy a car in Canada.
For many people, buying a car is an important part of moving to a new country. But with so many new laws and customs to learn, it can make the car-buying experience a bit confusing.
In this article, we break down how to buy a car in Canada so that you can get started right away.
Step 1: Assess your needs
Are you one person, or a family of six? Do you need lots of trunk space, or is leg room more important? From sedans to SUVs, hatchbacks to minivans, there are lots of different cars out there, and each one is designed for different needs. Some cars are fuel efficient, others are high-performance. And nowadays there are even electric vehicles (EVs) and hybrid electric vehicles (HEVs) to choose from.
Before you decide which car to buy, it helps to think of what your driving needs are. The better you know your needs, the more likely it is you’ll find the right car to match them.
Step 2: Choose new or used
Once you have a general sense of your needs, one of the biggest questions to ask yourself is whether to buy a new car or a used one.
New cars arrive in excellent condition, have manufacturer’s warranties, and come with the latest features and technology. They are also more expensive.
Used cars vary more widely. If you buy from a private seller, for instance, you may not get a warranty on it, or be sure of the vehicle’s condition. If you buy from a company like Clutch, however, you get a fully inspected and reconditioned vehicle, with return policies, protection plans, and additional warranties available.
There are benefits and drawbacks to both new and used, but one of the main advantages of buying a used car is that they don’t lose their value as quickly. As we explain in our article Should I Buy a New or Used Car?, new cars in Canada tend to lose 20% of their value in the first year alone.
Step 3: Select a payment method
Whether you go new or used, there are three main ways to pay for a car: cash, financing, and leasing.
Cash means you pay for the total value of the car upfront. This is the simplest way to buy a car, but most people in Canada do not have enough money at one time to pay for a car this way. As we explain in our article on How to Buy a Used Car, a good rule of thumb is to spend no more than 35% of your annual before-tax income on a car.
The second option is financing. Financing means that a financial institution (such as a bank) pays for the car that you want upfront, and then you pay the bank “back” over time in regular instalments. This is much easier for most people than paying for the full amount in cash, but it relies on a loan from a financial institution, so it comes with an additional cost: interest.
With financing, too, there’s a good rule of thumb: make sure your monthly payments are no more than 10% of your after-tax monthly income. If that sounds low, it’s because you also have to think about other recurring expenses like gas and car insurance.
The final option is leasing. Leasing means you don’t actually own the car but “rent” it from the car’s manufacturer (or owner) by paying a monthly fee. This is similar to financing because you pay for the car over time, but there is one big difference: at the end of the leasing term, you have to give the car back or buy it from them outright. Leasing is much less common with used cars.
Each option has different benefits and drawbacks depending on your budget and needs.
Step 4: Find out your credit
To finance a car at a reasonable interest rate, you need a good credit score—and if you are new to Canada, that can be difficult.
Fortunately, we work with several financial institutions that may be able to offer financing terms for new Canadians, even without a good credit score. Fill out our quick pre-approval form today (with no impact on your score) or get in touch with us at [email protected] for more information.
Step 5: Collect your documents
To legally own a car in Canada, you need a driver’s licence, a car insurance policy, and vehicle registration. Let’s start with driver’s licences.
Driver’s licences are issued provincially. If you already have a driver’s licence from your country of origin, you may be able to exchange it for a driver’s licence in your province. Do some research to see if your driver’s licence may be accepted in the province where you live, as well as what additional documents you may need to complete the exchange.
Even if you cannot exchange your old driver’s licence, the provincial authority may still take your previous driving experience into consideration and reduce the requirements you need to obtain a new licence.
Car insurance works slightly differently in each province, but it is usually simple. Note that you cannot get car insurance without a driver’s licence, so be sure to get a driver’s licence first!
Last but not least, vehicle registration. Unlike driver’s licences and car insurance, which must be obtained before buying a car, vehicle registration happens during the car-buying process itself or immediately after (depending on the province). In some provinces, the dealership or car retailer may be able to register the car on your behalf.
Step 6: Start browsing!
Last but not least, start browsing! You can visit new or used car dealerships in person, or save yourself time and stress by browsing online from one of several online car retailers.
At Clutch, we are proud to offer hundreds of high-quality cars, in every style and budget, and seamless delivery to your door.
Plus, all our cars undergo a 210-point inspection and reconditioning process, ensuring they are safe to drive and exceptionally clean.
Our cars also come with a free 90-Day Protection Plan, with additional warranties available, giving you peace of mind.
Finally, our cars come with a 10-Day Money-Back Guarantee, which means that if you don’t like it during those first 10 days, we’ll come pick it up for free, no questions asked.
We also work with many of Canada’s largest and most reputable financial institutions to offer financing directly through our website, making the car-buying process as quick, convenient, and stress-free as can be.
Welcome to Canada, and Good luck!