Personally, the timing on this piece couldn’t have been more perfect. On Friday, my partner was in a car accident. His vehicle was hit head-on by an oncoming car in a busy intersection. The accident wasn’t his fault and he wasn’t hurt, but his vehicle was written off. As a result, we spent the weekend exploring new vehicle options. Should we lease or buy new? In the end, we decided to buy new. Here’s what we learned this weekend.
8 Steps to Buying a New Car
- Talk about your personal and family needs. Your car should suit your lifestyle, as well as your driving schedule. Do you drive a lot? Do you need extra storage space? Come up with a list of features that you feel are must-haves. This will make car shopping a lot easier. If more than one of you will be driving the vehicle, discussing your needs beforehand will keep you both on the same page.
- Check consumer reports. Once you’ve decided on the type of vehicle you want, take a look at online consumer reports. Cars are rated on features such as how well they handle, fuel economy, safety features and comfort.
- Determine your budget. You need to decide whether or not you will need financing to purchase your new vehicle – most people need financial assistance of some sort. You will also need to consider how much you can apply to the sticker price as a down payment. Keep in mind, the larger the down payment the lower your monthly payment. Contact your financial institution about financing. Your interest rate will depend solely on your credit score. If your credit score is good, your interest rate will be lower. If your score is bad, your interest rate will be higher. Shop around to find the best rate. If you’re fairly confident about your credit score, you can wait until the signing of the contract to contact your financial institution.
- Visit dealerships. Now that you know what you are looking for and you’ve done the research and determined your budget, you’re ready to go shopping. Compare prices carefully from dealership to dealership. Ask if the ticket price is the best they can do. Often, dealerships have some leeway on the price and will lower it if they think you’re serious about purchasing the vehicle.
- Take the car for a test drive. You should always test drive potential cars. You want to make sure that it handles well and responds to your driving style.
- Signing the contract. At this point, you will be required to put a down payment on the vehicle. Again, the more money you put down on your purchase, the lower your monthly payments will be. Read the contract carefully before you sign it. Make sure that the contract includes a “buyer’s right to cancel” – a provision that is not required by law. This will allow you to return the vehicle should you change your mind for some reason.
- Get auto insurance. According to Federal law, all car owners must have car insurance. You can get car insurance from most financial institutions, as well as insurance companies. Again, shop around for the best rate. Car insurance rates can vary wildly. Do the legwork now and save later.
- Store car information somewhere safe. This isn’t really a part of the process, but it is important. Should you want to sell your vehicle in the future, you will need this information. Store receipts, contracts and your car’s VIN number (vehicle ID number) somewhere safe.
A Note on Leasing
If you feel that you aren’t ready for the financial responsibility of buying a car, leasing may be a better option for you. There are some restrictions with leasing, including how much you can drive and impose maintenance costs. In Canada, there are two types of leases you can purchase. An operating lease will allow you to purchase the vehicle at the end of the term, but it can be a very expensive option. Since the term is usually longer, a capital lease will allow you to purchase the vehicle at the end of the term for a lesser amount.
Again, interest rates on leases will vary and are dependent on your credit score. Shop around for the best rate. Make sure to read the contract carefully before you hand over a down payment. It could contain stipulations and exceptions that don’t work for you.