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When you move to a new country, buying a car can be an essential part of settling in. However, the process can be a bit confusing with unfamiliar laws and customs to navigate. In this article, we aim to break down how to buy a car in Canada, so you can get started with confidence.
Step 1: Determine Your Needs
Are you an individual or a family of six? Do you require ample trunk space or is legroom your priority? Sedans, SUVs, hatchbacks, and minivans are all different car options available, designed to meet various requirements. Some cars are fuel-efficient, while others have high-performance capabilities. Additionally, electric vehicles (EVs) and hybrid electric vehicles (HEVs) are also available for environmentally conscious drivers.
Before you make a decision about which car to purchase, it is helpful to assess your driving needs. The more you understand your needs, the higher the chance of finding a car that matches them.
Step 2: Buying New or Used
When it comes to buying a car, one of the biggest decisions you’ll make is whether to buy new or used. New cars are in pristine condition and come with the latest technology, but they’re more expensive than their used counterparts. Used cars vary in quality, with private sellers offering little guarantees on the condition of the vehicle. But when you buy from a reputable company like Clutch, you get a fully inspected and reconditioned vehicle with protection plans and additional warranties available.
There are benefits and drawbacks to both options, but one of the key advantages of buying a used car is that they don't depreciate as quickly as new cars. As we explain in our article, “Should I Buy New or Used Car?”, new cars in Canada typically lose around 20% of their value in the first year alone.
Step 3: Choose a Payment Method
After deciding whether to buy a new or used car, you'll need to choose how to pay for it. There are three main payment methods: cash, financing, and leasing.
Paying cash for a car means you cover the total cost upfront. This is the simplest method, but it's not feasible for most Canadians. As we explain in our guide on how to buy a used car, a general rule of thumb is to spend no more than 35% of your annual before-tax income on a car.
The second option is financing. With financing, a financial institution (such as a bank) pays for the car upfront, and then you pay them back over time through regular instalments. Financing is easier for most people than paying in full, but it comes with interest charges.
Due to the lack of credit history in Canada, newcomers may have a harder time securing financing compared to Canadian citizens. To secure the best interest rates, we recommend having the following, depending on your immigration status:
For individuals on a Work Permit, lenders typically require at least 1 year remaining on the work permit. However, this is void if there is a credit-worthy co-signer on the application.
Regardless of your status, you’ll need to have a valid Canadian driver's licence to get approved for financing, obtain insurance, and for the dealer to register the car in your name.
When financing a car, ensure your monthly payments are no more than 10% of your after-tax monthly income. This may sound low, but you must also account for recurring expenses such as gas and car insurance.
The final option is leasing, where you "rent" a car from the manufacturer or owner by paying a monthly fee. You pay for the car over time, but unlike financing, you don't own the car at the end of the lease term unless you choose to purchase it. Leasing is less common for used cars.
Each payment method has its own benefits and drawbacks, so choose the one that fits your budget and requirements.
Step 4: Collect Your Documents
In order to legally own a car in Canada, you must have a driver's licence, car insurance policy, and vehicle registration. Let's start with driver's licences. Driver's licences are issued provincially. If you already have a driver's licence from your country of origin, you may be able to exchange it for a driver's licence in your province. Be sure to do your research to see if your driver's licence may be accepted in the province where you live, as well as what additional documents you may need to complete the exchange. Even if you cannot exchange your old driver's licence, the provincial authority may still take your previous driving experience into consideration and reduce the requirements you need to obtain a new licence.
Car insurance works slightly differently in each province, but it is usually simple. However, note that you cannot get car insurance without a driver's licence, so be sure to obtain a driver's licence first.
Lastly, let's talk about vehicle registration. Unlike driver's licences and car insurance, which must be obtained before buying a car, vehicle registration happens during the car-buying process itself or immediately after (depending on the province). In some provinces, the dealership or car retailer may be able to register the car on your behalf. Check out our guide to motor vehicle registration in Canada for more information.
Step 5: Time to Browse!
Now it's time to start browsing! You can visit dealerships in person, or if you prefer a stress-free shopping experience, browse an online used car retailer.
At Clutch, we are proud to offer a vast selection of high-quality cars that cater to every style and budget, with seamless delivery right to your door.
Our cars undergo a rigorous 210-point inspection and reconditioning process to ensure they are safe to drive and exceptionally clean.
Furthermore, all our cars come with a free 90-Day Protection Plan, and additional warranties are available for added peace of mind.
We also offer a 10-Day Money-Back Guarantee. If you're not satisfied with your purchase during the first 10 days, we'll pick it up for free with no questions asked.
To make the car-buying process as quick, convenient, and stress-free as possible, we work with many of Canada's largest and most reputable financial institutions to offer financing directly through our website.
Welcome to Canada, and good luck!
