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.
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:
Ongoing costs, like:
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.
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.
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 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.
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.
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.
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:
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.