How to buy a car as a newcomer to Canada

Now that you've settled in Canada, you want to buy a car but don't know where to begin.

The car buying process may seem daunting at first. Where can I find a good car? How do I know it doesn't have any problems? Can I negotiate price? How do I transfer ownership to my name?

This article will simplify the process by walking you through all the steps. Hopefully you'll realize by the end of this article the car-buying process is not so daunting after all! Remember that conducting research and shopping around will allow you to get a car that you are ultimately happy with.

Four steps to buying a car in Canada

There are four steps that you will need to follow in this order to complete the process of buying a car in Canada:

Step 1: Get a driver's licence
Step 2: Find a car
Step 3: Get car insurance
Step 4: Register the car

Step 1: Get a driver's licence

The first step to owning a car is ensuring you have a driver's licence issued by the government of the Canadian province or territory you are living in. You will be able to drive anywhere in Canada with this driver's licence.

If you hold a valid licence from another country, you will probably be able to use it to drive in Canada for a short period upon your arrival. Keep in mind that each province and territory sets their own rules so you will need to check their website to learn more. Depending on the province or territory, you may need to complete a written exam on the rules of the road (there are study guides available to help you prepare), and one or two driving tests.

Visit the website of your province or territory's transportation department to learn more about the specific steps you need to take to get a Canadian driver's licence:

More information is also available on the CanadaVisa Forum.

Step 2: Finding the car

The most exciting step of the car-buying process is conducting research, test driving cars, and finally purchasing the car that meets your needs.

Research

You will want to ask various questions during the research process, such as:

What is my budget?

In addition to the amount you are able to spend on the car, you will also want to have some extra money saved up for routine and unforeseen maintenance expenses, as well as other car costs such as gas. As another example, it is common to buy 4 winter tires that you install on the car between October and April to help you navigate the icy and snowy roads in Canada. You should also keep in mind that you will need to pay tax and potentially other fees when buying the car. Even if you purchase a used car from a private seller, you may need to pay sales tax when you register your ownership of the car with the government.

You should also keep in mind that monthly car insurance is legally required in Canada.

What do I need the car for?

If you only need the car to move yourself around, then you may feel buying a sedan is appropriate. However, if you have a family, you may decide to target a larger option such as an SUV or a van.

Do I want an automatic or manual car?

Automatic cars tend to be more common in Canada but you can also find manual cars if you prefer. Manual cars tend to be a bit less costly than their automatic equivalents.

Do I want a new or used car?

New cars provide you with the peace of mind and satisfaction that you are the first person to own the car. On the other hand, they tend to be more expensive and see their values depreciate more quickly than used cars. This is important to consider if you think you may resell the car in the future. There are many used cars available in Canada and you can also find used cars that are nearly brand new.

What car models are on my short-list?

It is easier to go and look for cars once you've identified a few models you're really interested in.

Where to find cars to buy in Canada

There are many websites available to locate cars you may wish to inspect in person and test drive.

Examples include:

Google: You can Google "car dealers" to see the closest ones near your address in Canada. It is also an opportunity for you to to read Google reviews from other buyers about their experiences at these dealers

Kijiji: Kijiji is owned by eBay and it is a marketplace featuring both car dealers and used cars from private sellers. One of the advantages of buying from a private seller is it can be less expensive to purchase from them since they do not have the same expenses as a car dealership (e.g., marketing, payroll, insurance, rent, etc). On the other hand, you need to be very careful about buying from private sellers since they may not disclose the full history of the car.

Facebook Marketplace: This is another common place to find used cars from private sellers.

There are many websites dedicated to listing cars for sale, including:

There are more companies that are now providing you with the opportunity to complete an entire car purchase online. This has increased in prevalence in recent years and is marketed as a hassle-free alternative to the traditional way of buying a car in person. Among the perks of buying online include having the car delivered to your door in as little as 24 hours and having the ability to return the car if you change your mind.

How can I inspect the car?

It is normal to test drive a car in Canada. Just be prepared to show your driver's licence before you are allowed to go behind the wheel. If the car is used you will want to observe whether there is anything irregular about how it looks, drives, sounds, and smells. It is also normal to bring family or a friend so they can also inspect the car with you.

Once you are set on purchasing a used car and have agreed to price and all other terms with the car dealership or seller, you may wish to ask if you can have an independent car mechanic inspect the car before you complete the purchase. It is up to the seller's discretion to accept this request. If the car dealership agrees to this, they may have one of their staff accompany you to the mechanic or drive the car there themselves. You will be responsible for choosing the mechanic, scheduling an appointment with them to complete the inspection, and paying the mechanic for their time.

In addition, there are a variety of resources out there for you to learn about a used car's history. Often, the car dealer will provide you with these documents and private sellers may have them as well. Nonetheless, you may wish to conduct additional due diligence of your own.

Each car comes with a unique Vehicle Identification Number (or "VIN") that you can locate physically in several places in the car (such as where the windshield meets the dashboard and inside the driver's side door). You can then use this VIN to research this particular car.

Resources available include:

Third-party resources such as Carfax
Government documentation on a used vehicle's history

You can pay a fee to websites such as Carfax to get a report on the vehicle's history. You may learn things such as:

Whether the car has been in an accident
If the car has a safety recall (i.e., the manufacturer has recalled the car due to a safety issue it needs to fix)
Service history of the car
If the mileage of the car is consistent with what the seller is reporting to you
Whether the car has experienced damage (e.g., flooding)
Whether the car has any debt remaining (known as a "lien")

In addition, depending on your province or territory, it may be mandatory to purchase a government document that discloses background information on the history of the used car (e.g., a "Vehicle Information Report" or "Used Vehicle Information Package"). If the seller does not provide this, the buyer can request the report from their provincial or territorial government.

It is very important to know if the car has a lien. You should ask the seller this question and verify this information by conducting your own background check on the car. This is important because if the car has debt owing, the debt will be transferred to you. This means you could lose the car if you do not pay off the debt. If the car has a lien, you have a right to ask the current owner to ensure the lien is removed before you complete the purchase. The Canadian government's website contains more information on how to protect yourself from buying a car with a lien.

Can I negotiate the price?

Yes, it is socially acceptable to negotiate the final price of a car, whether it is brand new or used. It is best to go into the negotiation prepared by conducting research online of the average current sale price for the car based on its model, age, and mileage. If you are buying from a car dealership, get a sense before the negotiation of what the dealer's price is with tax and all other fees included. The dealer may be able to waive or reduce certain fees, but will be unable to remove other costs such as government sales tax.

Once you make your offer, provide the seller with evidence as to why you believe your suggested price is fair. This can be demonstrated by showing listings of the same car for sale in your city or being sold by a dealer's competitor.

Generally speaking, dealers will be willing to negotiate but will have less flexibility on how much they can reduce the price due to all the overhead costs they need to account for. On the other hand, a private seller can choose to sell the car at any price they believe is reasonable. In order to improve your chances of getting the seller to accept your offer, it is important to negotiate in good faith and make a proposal that is close to or slightly below market value.

Low-balling the seller may result in the negotiation breaking down quickly. On the other hand, if you feel the price is too high for the particular car, you should walk away and keep in mind there will be many other cars out there that fit your needs and budget.

How do I pay for the car?

There are a variety of ways you can pay for the car including by paying the entire purchase price upfront or through financing or leasing.

If you are going to pay for the entire car upfront, you can bring cash, or ask the seller if they will accept another secure form of payment such as a bank draft. A bank draft is like cash and payment is guaranteed by the bank. The seller may also agree to go to a bank with you and have the payment transferred to their bank account with the two of you together.

You can also seek financing for the car. You may try to obtain financing from your bank or from another lender. Or, you may be able to obtain financing from the car dealer. This means you will be responsible for paying back the loan and interest and once you have paid these off in full, you will be the owner of the car.

A third option is to lease the car. This means you effectively pay to rent the car for a given period of time. After the lease period is over, you either return the car or pay the remaining amount to buy it.

If you are looking to finance or lease, it is important to conduct thorough research during this process. Always read the fine print and ask questions so you fully understand the terms and conditions of the transaction.

Step 3: Get car insurance

It is the law to own car insurance for your vehicle in Canada. Car insurance is mandatory so that all those involved in an accident are protected.

Getting caught without car insurance is a serious offense that can lead to large fines, the potential loss of your driver's license, and other potential consequences such as your car being temporarily seized, as well as higher car insurance rates.

You also need car insurance to be able to register your car with the government.

There are various types of car insurance plans, including coverage for yourself and your car and/or for others and their car if you are at fault in the accident.

Types of car insurance coverage in Canada includes:

Liability coverage: This is the minimum required insurance in Canada. It covers you if you injure someone or damage their car. The minimum coverage required depends on each province. Typically, Canadians choose coverage between $1-2 million. It is important to have sufficient coverage so you do not have to pay extra from your own pocket in case you get in an accident.

Collision coverage: This coverage is optional but is recommended since it covers costs to repair or replace your car if you are at fault for an accident. A deductible is required, which means that you will need to pay a certain amount before your insurer covers the rest of the costs. You can choose the deductible amount. Common deductible amounts include $500, $1,000, and $2,000. The higher your deductible, the lower your monthly collision insurance premium tends to be, but this means you will need to pay more out of pocket in the event of an at-fault accident.

Comprehensive coverage: This protects your car when you are not driving it, such as if it is stolen or damaged while it is park (e.g., due to the weather). This coverage also requires a deductible, which again, you can choose yourself.

It is also important for you to research various car insurance rates and coverage types before choosing which insurance provider to go with. Car insurance rates vary significantly based on factors such as your car, age, gender, driving experience and record, residential neighbourhood in Canada, as well as the car insurance company. It is common to get quotes with wide ranges from various insurers. It is best you shop around and get as many quotes as possible so you are confident you are paying a fair rate and getting suitable coverage.

You may wish to reach out to an insurance broker for assistance. Insurance brokers have an obligation to look out for your best interests. You can search insurance brokers on Google or ask family and friends for referrals. You can also enter your information on the websites of various insurance aggregators as well as insurers themselves to get real-time estimated quotes. Ultimately, you will need to speak with an insurer over the phone to get a final quote.

Once you have secured the insurance, your insurer will send you evidence of your coverage via email and physically to your mail box. It will be important to bring this evidence with you to your provincial or territorial transportation ministry to complete the car registration process.

Step 4: Register the car

If you are buying from a dealer, they will usually complete the registration process with your provincial or territorial government.

If you are buying a car from a private seller, you will need to register the vehicle with the government yourself. You will need to bring the following with you:

Your driver's licence
Proof of valid car insurance
Vehicle permit and a signed transfer of ownership document

Each province and territory has its own rules on the steps you need to complete to register a privately-sold used car. Carfax provides an overview of rules across Canada.

If you do not have a license plate for the car you will be able to purchase one when registering it. Your province or territory will also calculate and charge you sales tax based on the purchase price or wholesale value of the car, although again, the rules vary by jurisdiction.

Enjoy the ride!

Congratulations! You've completed your first car purchase in Canada and are now a proud car owner. See? It wasn't so difficult after all. With your new car, you are now able to create additional memories with family and friends as you get to enjoy more of what Canada has to offer. Enjoy the ride!

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