Ready to be a first-time car owner? Congratulations!
As is the case with most big purchases, there are a variety of factors to consider and look out for before sealing the deal. Whether you’re already set on your dream car, or don’t have a clue where to start, don’t worry. There are a range of options you can choose from — all the way from what type of vehicle to buy, to the insurance coverage you need to protect your new ride.
Budgeting for your first car
It’s important to evaluate the upfront and ongoing costs before purchasing a car, and knowing your budget is a crucial first step. Not only do you have the upfront cost of buying, financing, or leasing the car, but you’ll also have to think about ongoing costs.
Below are some important things to keep in mind when deciding on a budget for your first vehicle.
Upfront costs, like:
- Purchase price
- Financing and interest expenses
- Vehicle inspection
- Registration and licensing
Ongoing costs, like:
- Gas
- Maintenance and servicing
- Insurance
These expenses will vary depending on your individual needs and wants, but it’s a good starting point to consider the true cost of ownership.
Now that you have a general idea of how much you’d like to spend on your new car, you’ll have to decide how you want to purchase it. There are a couple of different options.
Purchasing your first car outright
Buying your car outright means you won’t pay any interest, which is money back in your pocket.
However, with the cost of new and pre-owned cars climbing higher, it’s important to make sure that you budget for this big purchase. Having extra cash on hand for incidentals is essential, so you won’t want to drain your entire savings account just to avoid monthly car payments.
Financing your first car
A feasible option for those who don’t want to or can’t buy their vehicle outright, financing allows buyers to choose a monthly payment plan. You can put down a lump sum (10% is the norm for a car down payment) and finance the remainder of the purchase price, or you can finance the entire vehicle, depending on your situation and dealership. Interest rates can vary, so you’ll want to do your research and find the most ideal lender.
Another thing to remember if you finance: most lenders require that you keep full insurance coverage on your car, including comprehensive, collision, and liability insurance.
Leasing your first car
Leasing is quite similar to financing. You’ll decide on a multi-year term, provide a down payment, and make regular payments. The only difference is that you’ll have the option to return your vehicle to the dealership at the end of that term, or pay the difference on your loan to make it your own.
The pros are that you’ll get to drive the car during its best years, and returning it after a few will mean fewer headaches and less maintenance for you. Plus, you won’t have to worry about its value declining over time or having to sell it one day.
On the other hand, most leases come with limits on how many kilometres you can drive during the term. If you exceed the limit, you can incur extra charges. The same can happen if you return your vehicle in rough shape; the dealership can charge you for additional wear and tear repairs.
Should your first car be new or pre-owned?
Another option you have when it comes to buying your first car is purchasing a new vehicle versus a pre-owned (used) vehicle.
Buying new gives you the opportunity to seek out more advanced features, better gas mileage and efficiency, and most often, more financing options. However, you might face higher upfront costs and a more expensive insurance premium.
Buying a used vehicle is often the more affordable option but comes with the caveat of more frequent/pricey maintenance and servicing as it continues to age.
Should you buy a gas, hybrid, or electric vehicle?
Weighing your preference for gas, electric or hybrid vehicles can be tricky. While electric vehicles are rising in popularity, particularly against the backdrop of today’s rising gas prices, any one of these vehicle types has their own unique pros and cons.
| Type of vehicle | Advantages | Disadvantages |
| Gas | • Lower sticker price than electric or hybrid vehicles • Can travel longer distances • Better horsepower |
• Being phased out by some manufacturers • Gas prices are more expensive than charging • More regular maintenance is needed |
| Electric | • Reduced emissions • Huge increase in savings with electric charging vs. gas • Requires less maintenance • Option of recharging at home • Competitive lease rates • Rapidly becoming the new "normal" |
• Expensive upfront costs • Produces range anxiety (i.e. not knowing if the charge will last the distance) • Can’t travel as far in a single trip • Takes longer to refuel (anywhere between 30 min to several hours) |
| Hybrid | • Reduces range anxiety that comes from fully electric vehicles • Variety of hybrid vehicles to choose from • Better fuel mileage than gas • Reliable with less maintenance than gas vehicles • Produces fewer tailpipe emissions than gas vehicles |
• More expensive upfront costs than gas vehicles • Gas “payback” time varies from each make and model of a hybrid vehicle – some may take a lot longer than others • Less horsepower |
Buying your car from a reputable source
The next step is to figure out where, exactly, you plan to buy your vehicle. Whether you’re opting for a new or used car, gas, electric or hybrid vehicle, it is essential to buy from a reputable source. After narrowing down the potential make and models of the car that you are looking for, search for dealerships online.
Using online platforms and tools that make the process fast and easy can be tempting but remember to do your research by looking at customer reviews and asking around to see if anyone you know has had a good (or bad) experience. Friends, family, and co-workers are a great source of information.
Buying a car online is a less traditional alternative, but if you do your due diligence, this option can produce some enticing deals. Visiting Facebook Marketplace, Kijiji, or other websites is a viable option when it comes to buying used cars. However, it is important to do your own research, too. The Ontario government suggests the following before buying a used vehicle:
- Take a look at the vehicle history, including maintenance records. You can typically do this by downloading a CARFAX report.
- Scope out the vehicle’s emissions testing history on the emissions testing website. It’s free, but you will need the Vehicle Identification Number (VIN).
- Ask the seller to do an emissions test on the vehicle and then give you the results.
- Verify that the seller is in fact the legally registered owner of the vehicle.
- Ensure that the VIN is identical to what’s listed on the owner’s permit.
- Request or buy a Used Vehicle Information Package and check the lien/debt information.
- See if you can identify any obvious signs of damage, and have the vehicle inspected by a mechanic.
- Take the vehicle for a test drive.
Protect your ride with the right insurance coverage
Insurance remains crucial for your safety, and the protection of your new vehicle. Not only is car insurance mandatory in Canada, finding the right policy is essential, as it’ll offer you peace of mind and reduce out-of-pocket costs if you’re ever involved in a collision.
The price of your insurance will depend on the type of car you get, but that’s not the only factor that impacts your rate — your age, driving history, where you live, and even the other drivers in your home can also affect your premium. It’s best to shop around to see where you get the best value (and coverage) for your dollar.
Now that you know about all your options, get out there, and get looking. Buying your first car is a huge milestone, and it’s an exciting journey to be on.
