The average Canadian spent $4,000 less in 2020 due to the pandemic, according to the Bank of Canada. Combined with emergency aid transfers, Canadians socked away $180 billion in pandemic savings last year. Some of them could start spending that money soon, which may involve the purchase of a new or used car.
Buying a new or used vehicle: which is best?
Buying a new vehicle has its advantages. You know there haven’t been any problems or collisions, you’re the only person who’s driven it on the open road, you get to choose all the features you want, and it will come with a warranty.
But there’s also the depreciation of the vehicle you need to consider. According to Carfax, the value could fall more than 10% after the first month, another 10% after the first year, and 15% a year over the next four years. That means the average value will drop 60% over five years.
The cost of buying new can also be expensive, especially if you decide to finance the purchase and the interest rate is high.
Buying a used vehicle also has advantages. Of course, the purchase price will be lower. Also, the car insurance rate may be less than what you would pay on a new vehicle. The cost of financing will likely be a lot less too.
There are also disadvantages to buying a used car. The vehicle might need to be repaired more often, and you won’t know the vehicle’s history unless you do some research. Also, the warranty period may have ended, certain safety and convenience features you like might not be in the vehicle you buy.
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Steps to take when buying a used car
There are a number of steps you should take before buying a used vehicle. Here are a few suggestions:
- Have a budget. Similar to buying a home, you should have a budget, so you don’t overspend.
- Narrow things down. It’s best to choose a specific type of vehicle as well as the brand and a specific model. If you don’t do that, you could be searching for a long time.
- Read reviews. Other owners are your best source of information to learn more about the pros and cons of the vehicle you want.
- Find potential sellers. You may find a private seller on a website or at a dealer.
- Compare prices. Once you’ve found a seller, compare the price with the industry average.
Should you buy a vehicle from a private seller or dealer?
There are two options for buying a used car: an owner or a dealer.
You can find private sellers on a number of reputable websites. You can also try searching for vehicles on other online classified sites.
There are advantages and disadvantages of buying from either a private seller or a dealer. For instance, purchasing from a private seller usually means you’ll get a better price while a dealer can offer warranties and a vehicle inspection.
If going with a private seller, you can protect yourself by getting the vehicle inspected by a reputable shop that can detect and help you avoid any problems. When buying from a dealer, make sure to check their online reputation.
What to do before buying a used car
Prior to purchasing a vehicle, it’s recommended you do the following:
- Check the vehicle identification number (VIN) and make sure it matches the one on the owner’s permit or vehicle registration form.
- Ensure the seller is the registered owner.
- Inspect the vehicle for damage both inside and outside. If possible, have a mechanic look at it for you. When a car undergoes a major repair after a collision, its resale value will diminish.
- Get information about the vehicle’s collision history and the warranty.
- Look at the odometer; if the reading is low and the vehicle is old, it may be a sign someone has tampered with the odometer.
- Take the vehicle out for a test drive.
When purchasing a used car in Ontario or Alberta, each provincial government has specific recommendations.
Before buying in Ontario, the government recommends you check the Drive Clean website for the vehicle’s emissions testing history. You can also ask the seller to perform the test and provide you with the results. The province also recommends that you request or purchase a used vehicle information package (UVIP) to check its lien or debt information.
What you need to do after buying a used vehicle
When the purchase is made, there are certain requirements in Ontario and Alberta that need to be met.
In Ontario, the seller must give you the vehicle portion of the owner’s permit, the UVIP, and the bill of sale with the purchase price and seller’s name. The bill of sale must be signed and dated by both you and the seller. You must also register the vehicle at a ServiceOntario centre within six days of making the purchase.
In Alberta, you must complete a bill of sale. This following needs to be included: your name, address, and signature as well as those of the seller’s; the VIN; the purchase price; and the make, model, style, colour, and year of manufacture. After the purchase is complete, you need to get insurance and have the vehicle registered by a registry agent before driving it.
Getting the right car insurance policy
Insofar as getting a car insurance policy goes, it’s worth taking a look at what your options are. You can buy a basic or standard policy that include the mandatory minimum coverages you must have to drive any vehicle, such as third-party liability, accident benefits, and uninsured auto. But there are other coverages you might wish to add to your policy to ensure you have more fulsome protection.
For instance, collision or upset insurance, which is optional coverage you need to add to your policy, will pay for losses if you hit an object (such as a guard rail or streetlight) or when you’re responsible for a collision with another vehicle.
And comprehensive coverage, another optional type of coverage, pays for damage to your vehicle that aren’t caused by an accident, such as theft, hail, storms, vandalism, and flying or falling objects.
Have a conversation with your insurance broker or agent about how best to protect yourself and vehicle. Also, before you purchase any new or used vehicle, get an idea of what a policy will cost to insure it by comparing policies and premiums from a broad range of insurers for free.