If you are a foreigner in Canada your plan is to buy a new car in Canada, there are steps to take before deciding on which car to buy and how to buy it. Buying a car in Canada is an exciting journey and a joyous one for that matter, but the process can seem daunting, especially for newcomers.
That is why I have taken my time to put this guide together -covering all the steps involved in purchasing a vehicle in Canada and obtaining auto insurance, from budgeting to registering your new car.
The first thing to do when making the decision to buy a car is to choose the right car to buy. This is an important step because buying the wrong or bad car at the right time can ruin your car experience.
How to Choose the Right Car to Buy
- Your first decision is picking out the right car for your needs and budget. Therefore, the following factors should be considered.
- New or used: New cars cost more but include warranties. Used cars are cheaper but inspect carefully for issues.
- Vehicle type: Options like sedans, SUVs, trucks, sports cars, etc. Choose based on passengers, cargo, and driving environment.
- Features: Consider must-have features like space, fuel economy, technology, cargo space, and other preferences.
- Budget: Determine how much you can afford to spend factoring in the vehicle price, insurance, fuel, maintenance, and repairs.
- Regional considerations: Some types of vehicles handle winter conditions better. Get all-wheel drive if driving in snowy areas often. Once you’ve determined your ideal car criteria, start researching vehicles for sale that match your parameters. Check online listings, visit local dealerships, and attend auto shows to explore all the options.
You need to Check the Vehicle History
Before purchasing a used car, always get a vehicle history report to uncover any potential issues or problems. Two major vehicle history sites in Canada are:
- Carfax – Comprehensive reports with accident history, open recalls, service records, and more.
- Carproof – Detailed histories including ownership changes, liens, title checks, and accident reports.
Vehicle history reports cost around $20-50 depending on the depth of the report. They are essential for assessing the value and safety of a used vehicle. Avoid cars with major accident damage, numerous owners, or other warning flags.
Where to buy and the price
Prices of cars vary depending on locations and Car shops. You will need to research where to buy affordable cars putting factors like proximity to your house into consideration. You are now ready to purchase. Either buy from a dealership or a private seller.
Buying From a Dealership
- Test drive car and negotiate final price including taxes/fees
- Provide personal info and sign paperwork including bill of sale, financing contracts
- Pay the deposit and arrange delivery if not taking immediate possession
Private Purchase
- View car, test drive, get vehicle history report
- Agree on price and payment method (cash, bank draft, electronic transfer etc)
- Pay the seller, obtain a signed bill of sale transferring ownership
- Both parties sign and date transfer/registration forms
After this has been done, you will need to take the factors below into consideration.
- Vehicle price: MSRP for new or asking price for used. Remember taxes will add another 13% or more.
- Insurance: Get quotes to estimate your annual insurance costs for that specific vehicle.
- Registration, and taxes: One-time fees to register and get license plates in your province.
- Interest charges; If financing, estimate total interest costs over the loan repayment period.
- Operating costs: Fuel, maintenance, repairs. Get an idea of the costs of regular service and potential repairs based on make/model. Your total monthly car costs should fit comfortably within your budget.
Schedule a Test Drive
After deciding on the car to buy and everything regarding budget and the car history done. Then the next thing to do will be to decide where to buy the car. Once this is done, go ahead to test drive the car in person before committing to buy. This lets you check if the car runs properly, accelerates/brakes smoothly, and is in good condition.
Also, you will be able to gauge whether the car meets your needs for cargo, passengers, technology, etc, and also lets you get a feel for the overall driving experience and comfort
Ideally, test drive the exact car you intend to purchase. Bring the vehicle history report and inspect it to match the VIN. Take at least a 15-30 minute test drive on different road types. Have a mechanic inspect it as well if possible.
Pick Your Payment Method
Determine if you will buy outright in cash, finance through a car loan, or lease:
- Cash purchase – Avoid loan interest but require having sufficient savings.
- Car loan – Pay off over time. Typically 3-7 year terms at 4-7% annual interest.
- Leasing – Lower monthly payments but you must return the car after your term and have mileage limits.
Compare all options and go with the most cost-effective plan for your financial situation.
Apply for Financing
If financing, shop around with banks, dealership lenders, and third-party lenders to compare:
- Interest rates and fees – The annual interest rate impacts your total borrowing costs.
- Loan terms – Longer terms (e.g. 7 years) mean lower monthly payments but higher interest.
- Pre-approval – Gets you pre-qualified for an auto loan so you can focus on picking the car.
Banks often offer the best rates. Having a solid credit score helps secure optimal financing.
Register Your Vehicle
Within a few days, you must register your car in your name:
- Insurance – Have at least basic insurance set up before registering.
- Plates – Remove old license plates and install new plates you are issued.
- Registration – Bring signed paperwork to the provincial registry office to register ownership under your name. Pay applicable one-time registration taxes and fees.
You will receive a registration certificate proving ownership. Keep this and your proof of insurance in the car at all times.
Obtain Auto Insurance
Auto insurance is mandatory across Canada. Get at least basic coverage before driving off the lot.
Minimum Required Coverage
Every province requires third-party liability coverage to register a vehicle:
- Bodily Injury – Covers injuries to other people
- Property Damage – Covers damage to other vehicles/property
- Accident Benefits – Medical and rehabilitation for you and your passengers
Optional Additional Coverage
For more protection, consider adding:
- Collision – Damage to your car from collisions
- Comprehensive – Cover from theft, vandalism, fire, natural disasters
- Underinsured Motorist – Extra coverage if an at-fault driver lacks sufficient insurance
- Gap Insurance – Pays off your total car loan balance if your vehicle is written off
Getting Quotes
- Check insurance comparison sites to get quotes from multiple providers at once.
- Consider both brokers and direct insurers like Belair, Intact, Desjardins, Aviva, Sonnet, TD Insurance.
- Provide details on your driving record, vehicle, usage, driving history, projected mileage, and more to get personalized quotes.
- Ask about available discounts based on your age, driving history, vehicle safety features, and alumni or employer affiliations.
Pick Your Policy and Provider
Review quotes carefully and consider:
- Premium amount – The total yearly and monthly cost of the policy. Get quotes from multiple insurers.
- Coverage inclusions – Make sure desired coverages like collision, comprehensive, underinsured etc are included.
- Deductible – Your portion of repair costs before insurance kicks in. Higher deductibles mean lower premiums.
- Discounts – Take any discounts you qualify for to lower your costs.
- Claims process – Understand how to file a claim and read reviews on the provider’s claims handling reputation.
- Financial stability – Check the insurer’s financial rating. Select a well-rated and established company you can trust.
Once you decide on the right policy, contact the provider to purchase and activate your coverage. Inform your old insurer if switching providers.
With all the paperwork completed, new plates installed, and an insurance card in hand, you are ready to pick up your new vehicle and hit the road. Follow all traffic laws, drive defensively, and don’t forget to enjoy your new ride. Perform regular maintenance and services as per the manufacturer’s schedule in your owner’s manual.