What to Consider When Buying Your First Car

How does buying your first car work?

When it comes to buying your first car, you’ll want to start with research. A lot of research. Knowing what you want and how it will augment your life is essential. Buying a fuel-efficient car to commute to work compared to a minivan to shuttle kids to school are very different options — knowing what you’re looking for beforehand will help narrow your search when buying your first car and keep you focused when walking the lot with a car salesperson. The second thing to consider is how much you can afford and where you want to shop. 

Buying your first car from a dealer

Buying your first car from a dealer allows for on-site financing, vehicle options, and brand-specific support. Visiting a dealer will allow you to test drive the car and make sure you like how it handles, as well as how comfortable it is — this is essential if you'll be spending a lot of time behind the wheel. 

Don’t hesitate to ask questions, and ensure you understand all the features as well — better safety ratings will give you peace of mind, as well as a better insurance rate. It’s important to factor in how much it will cost you to own and operate the car; how often you'll have to fill up the tank can come as a shock to some new drivers, so ask about fuel economy and factor in your daily commute.

Buying your first car through a private sale

Another option for a vehicle may be through a private sale, bypassing the dealer completely. You can find options through online marketplaces, or even through your network of friends and family. Choosing to purchase through a private sale may mean a lower price on a used vehicle if you’re familiar with the options you want. 

Private sales do have an element of risk, as the purchase isn’t protected by the regulations that dealerships must abide by. However, there is certain documentation you can request to completely understand the history and condition of the vehicle — we detail more on that below. 

Financing options for buying your first car

Buying your first car is a significant purchase, and there are financing options that make it accessible if you don’t have the full purchase price up front. There are three routes you can take: lease, finance, or buy the vehicle outright. 

Leasing a vehicle means that you don't own the vehicle but rather pay to use the car as it depreciates. Leasing offers more flexibility, newer vehicle options, and usually lower monthly payments. However, if you exceed your allotted kilometres or break your lease early, you may be penalized. 

With financing, loans are obtained from the car dealership, your bank, or a credit union, covering the gap between your cash in hand and the actual purchase price. Here, you own the car, allowing you to do what you like (and drive as far as you’d like) while making payments on your loan. 

Finally, if you have enough cash on hand you can buy the vehicle outright, making for a cheaper purchase as you won't have to pay interest on the transaction. 

Buying your first car in Ontario

Buying your first car in Canada isn't universally the same across the country — each province and territory has their own regulations. If you're considering buying your first car in Ontario, there are various regulations in place that protect you as the buyer. Staying informed on your rights as a buyer whether for a new or used vehicle, will help you make educated choices when buying your first car. 

The Ontario Motor Vehicle Industry Council (OMVIC) requires all salespeople and dealerships to register through an online portal to protect consumers. By checking up on your dealership before purchase, you can rest assured that they’re compliant with professional standards and regulations. 

Purchasing through an OMVIC dealer also provides access to the province's consumer protection legislation compensation fund should something go wrong in the sale or lease of your vehicle. To avoid any surprises, always be sure to ask for clear documentation on the car features and pricing, double-checking that the price is an "all-in" price, inclusive of everything except taxes and licensing fees.

The government has regulated the preowned car industry as well. A used vehicle is legally required to come with a Used Vehicle Information Package (UVIP); a rundown of important details on the car. The UVIP will give you a complete picture of the car's make, model, and engine specifics while also providing a detailed history of the vehicle including collisions, bodywork, and fitness to be driven. 

The UVIP also verifies if there are any liens on the vehicle, and its average wholesale value. The seller's responsibility is to provide this to the buyer upon sale of the vehicle — so if you're going the private sale route, make sure this comes with the car.

How to get insurance when buying your first car

Before you've even driven off the lot, your new car will need to be insured — that's the law in Ontario. Getting an insurance quote before you start looking at vehicles is a great idea, allowing you to factor payments into your operating costs and budget. Preemptively getting a quote will also help narrow down the make and model to buy, as the car's industry safety ratings may impact your insurance rates significantly. 

Pricing and coverage research can be done directly through an insurance provider's online quote system, through a broker, or using an aggregator like LowestRates.ca. If you're buying your first car in Ontario, you’ll require a minimum standard of coverage. This includes third-party liability, statutory accident benefits coverage and uninsured automobile coverage. Beyond that, you can choose additional coverage to increase your liability and protect yourself, as well as your new car.

Should you choose to lease a vehicle, you'll still obtain regular vehicle insurance yourself, but the lessor (the company you're leasing from) is listed as the vehicle's actual owner. This doesn't impact your use of the car, but ensures that the lessor will receive compensation should there be damages or a total loss of the vehicle due to a collision. When entering a lease, check to ensure you've got the appropriate coverage as well as the right information on the lessor to avoid issues if you have to make a claim.

A final note on insurance — make sure the policy's effective date is when you’re picking up your new car. It’s against the law to drive without insurance on a vehicle, with fines for driving without insurance starting at $5000 in Ontario. Not a cute look for your new ride, so make sure you're covered before you leave the lot!