Buying a used car instead of new car is a wise financial decision. A vehicle loses more of its value when it's first driven off the dealership lot than at any other stage of ownership. This is due to a process known as depreciation, and it's prudent to let someone else pay that price.
However, taking on a car later in its life cycle means you don't know how it's been driven or maintained. This opens up the potential for greater risk and higher repair bills. Here's a step-by-step guide to the car buying process in Canada to help minimize that risk, get the best deal, and make the experience of buying your next vehicle as positive as possible.
How to Buy a Used Car in Canada
Do your research
Sifting through thousands of motor vehicle listings is an intimidating prospect if you don't know where to start. Before looking at a single listing, make a list of the vehicle features that are most important to you. Here are some questions you can ask yourself to help narrow things down:
How many seats do you need?
Will space for your family of four be enough, or do you frequently need to play chauffeur to half a baseball team? Or are you an empty nester who can get by with a smaller back seat? This question is a great place to start because it provides some quick clarity on which vehicle segments will be your best fit.
If it will only be you and one other person in the car most of the time, you may prefer a lower-cost subcompact SUV like the Nissan Kicks or Mazda CX-30. If you need three rows of space, you could look for a Subaru Ascent or a Toyota Highlander. A family of four would be most comfortable in a compact SUV like the Volkswagen Tiguan or Audi Q5, or a midsize SUV like the Chevrolet Blazer. Taking some time now to figure out the right vehicle type for your needs will make your search much easier.
What performance-related features are essential to you?
Do you need a lot of ground clearance? All-wheel drive? Lots of storage space? If any or all of these automotive attributes will be important to you – and they are to many Canadians given that most of us deal with winter weather for four to six months of the year – then an SUV or a pick-up truck is likely what you're looking for. For those who stick close to urban or suburban environments where these features are less of a factor, sedans, hatchbacks, or minivans might do the job just as well and are often available at lower prices.
Is fuel consumption a factor?
Do you care more about keeping your fuel bills and emissions low, or do you need more power because you require more payload or towing capacity? It's not a bad idea to pull some fuel economy data for vehicles in the model year and segment you're considering so that you have a feel for what falls within a normal range. A ratings search tool with data going back to 1995 is available on the Natural Resources Canada website.
What extra features matter most to you?
Do you really want Apple CarPlay and Android Auto connectivity, heated seats, satellite radio, or other nice-to-have features that aren't standard in every vehicle? Write these things down so you can compare the list against vehicle advertisements as you view them. By the time you get through several dozen listings, you'll be glad you did.
How are you going to pay?
If you're looking for a low-cost winter beater and can pay in cash, that's great because it gets you out of making a monthly payment. But don't forget that you'll still need to spend on fuel, car insurance, and ongoing maintenance, so you'll want to draw up a budget to ensure you can cover those costs.
If you're looking for something newer with more features, it will be more reliable but will cost more up front. This may mean you'll need to seek out a car loan. This can be arranged through the dealer making the sale or through your own bank. It's a good idea to know what you qualify for and can afford before you start to look through listings.
Now that you've got your needs and wants laid out and have a handle on what you can afford, go back and look at your budget. Consider whether the price range you're shopping within is still realistic. For example, if you need a three-row SUV with low kilometres or the latest high-end features, you're not going to get that for $10,000. Reassess your goals if necessary until you feel your expectations are reasonable, and then you're ready to move on to the next step.
Start shopping
Now that you have an idea of what you're looking for, it's time to begin your search.
The safest bet is to buy from established used car dealers, either directly or through online vehicle listing sites such as CarGurus. Car dealerships may sell used vehicles through a manufacturer's certified pre-owned program or a separate used vehicle department. Registered dealers are regulated and will usually handle portions of the process for you such as completing a safety inspection, submitting the sales tax payment, and assisting with registration.
This doesn't mean every vehicle sold by a dealer is perfect or free of problems, but it does offer a layer of protection and some peace of mind for the car buyer. Users at CarGurus can rate their experiences with individual dealers, and those ratings are displayed alongside listings.
Vehicle auctions that are open to the public can be a source of good deals for buyers who are confident in what they're looking for and their ability to spot issues on their own.
Be cautious with private vehicle sellers
Private listings are prevalent online on general classified sites or social media. It's wise to be especially cautious of these listings. They can be prone to scams from sellers known as curbsiders, who post misleading listings or attempt to sell cars that are former write-offs, are flood damaged, have tampered odometers, or have other issues. If you get scammed by a private seller, you have no protection and no recourse. This doesn't mean every private seller is a criminal, but it does mean you'll need to be extra vigilant.
Before beginning to spend time on investigating any listing, ask the seller about condition of the car, its history and warranty status including any extended warranties, and whether service records and a vehicle history report are available. It's good to get this information up front so that you can check that it aligns with what you learn about the car throughout the sales process. If your intuition senses that something is off, don't hesitate to walk away. There are plenty of cars out there!
Think about a trade-in
If you're thinking about buying your new car from a registered dealership, you might want to consider trading in your current car. This is the most convenient option since you don't need to spend time selling your old car elsewhere.
However, even though the salesperson at a reputable dealer should offer a fair price, the nature of used car prices means the dealer can't offer you the same pricing you would get in a private sale. A dealership is a business that aims to make a profit when they move your pre-owned vehicle on to the next owner.
If you want to maximize the amount of money you get for your used car, it pays to list and sell it yourself. If you don't mind getting a slightly lower price but saving some time and hassle, go with a trade-in.
Investigate thoroughly
Once you find a vehicle that interests you, follow these steps to investigate it thoroughly before you commit to a car purchase.
Verify the car's value
If you found the listing on a website such as CarGurus, you will have seen a tracker showing whether the asking price is higher than, on par with, or lower than the average price for that vehicle. If you're buying it from elsewhere, do some research online to find the market value and ensure the asking price is fair.
Verify fuel consumption and safety ratings
Double-check the fuel consumption rating with Natural Resources Canada for the make, model, and model year in question. Check the safety rating online with the Insurance Institute for Highway Safety (IIHS) to check that it's crash test results are acceptable.
Arrange to see the vehicle
If at this point the vehicle seems worth pursuing, negotiate to meet with the seller. If it's a private sale, consider meeting the seller in a busy public place rather than at a residence or an isolated location, and let someone know where you're going.
Check for damage
Before getting into the vehicle, check the exterior for undeclared damage such as scratches and dents, and check all four wheels and all glass for damage. Make sure the car's stance is level to check for obvious frame or suspension damage.
Check for signs of flood damage such as a musty-smelling interior or rusted bolts under the floor mats. If anything raises doubts, do not proceed with the sale. A flood-damaged vehicle is very risky and is uninsurable in some jurisdictions.
Take it for a test drive
Test driving the vehicle thoroughly should involve both city streets and highways if possible. Find opportunities to climb a hill, accelerate and brake slowly and suddenly, steer through curves, and execute an abrupt lane change and a three-point turn to verify maneuverability. Check features that a safety inspection won't such as the radio, HVAC systems, heated seats and steering wheel, windows, door locks, wipers, cruise control, Bluetooth functions, optional safety features like blind spot monitoring, and seat adjustments to ensure everything is working as declared.
Check the vehicle history
As you get closer to being prepared to make an offer, order a vehicle history report if you haven't already. Verify the vehicle identification number (VIN), and check the vehicle's status and whether it's carrying any liens.
If you live in Ontario, the seller is required to provide a Used Vehicle Information Package (UVIP) that will contain this information. In other provinces, you'll need to order these reports yourself, which can be obtained from several online providers. A CARFAX report is one example of a reputable vehicle history report provider.
A vehicle's status should be listed as none or normal. If you see the status listed as salvage, irreparable, non-repairable, rebuilt, or stolen, walk away without hesitation. Cars with these statuses are uninsurable in their current state. The only exception is if you're willing to jump through the hoops required to return a salvage car to rebuilt status so it can be registered.
It's especially important to verify there are no liens on the vehicle. If debt is owed, you could become liable for it and even find that your vehicle is repossessed if it goes unpaid. Check for liens not only in your own province but in every jurisdiction where the vehicle has been registered.
If you learn anything at this stage that doesn't line up with the information the seller gave you at the beginning of the sales process — for example, the odometer reading doesn't match the vehicle history report, or the car has been in an accident the seller didn't disclose — it's time to strongly consider pulling the plug.
Get a safety inspection
In a pre-purchase inspection, a licenced mechanic puts the vehicle on a hoist to check for things like hidden rust, bad brakes, broken lights, or anything else that needs to be repaired for safety.
In some provinces, a safety standards certificate is required before you can register a vehicle. It's a good idea to get one even when it's not required: an inspection costs $100 to $200 on average, but it can alert you to issues costing many thousands more to repair. Depending on what the inspection uncovers, you may wish to walk away from a deal or use the information as leverage in your price negotiations.
Note this type of vehicle inspection only verifies factors relating to roadworthiness. Things like the air conditioning or radio aren't checked, so don't forget to assess them on your own during the test drive.
Be skeptical if the seller provides an inspection report for you. When you don't know the seller or the mechanic personally, you have no way of knowing whether the work was completed honestly. This is something you'll want to pay for on your own and have done by a mechanic you trust.
Finalize the sale
Once you've factored in what you've learned from the checklist above and negotiated a price with the previous owner, it's time to pay for the car, collect a bill of sale, and register your new vehicle.
The steps to finalize a sale vary by province. You will be required to arrange proof of insurance on the vehicle before it can be registered. You should also be prepared to pay either HST or your provincial sales taxes. The tax rates vary by province but are generally in the same range as the provincial sales tax rate. In British Columbia, they can get significantly higher for luxury vehicles due to the province's tax structure.
If you've bought from a registered dealer, the tax will typically be collected at purchase and submitted to your province's ministry of transportation for you. If you buy privately, you'll most likely have to pay the full amount upon registration. The amount of sales tax charged is typically based on the vehicle's wholesale value, not the actual purchase price.
Exceptions are made in some provinces when swapping vehicle registration to a new owner based on the condition of the vehicle or whether it was a gift from a spouse or other close family member. Research the rules in your province in advance so you're not met with any surprises when you go to pick up your licence plate.
To help you navigate these differences we have created a series of additional guides:
- Buying a Used Car in Ontario
- Buying a Used Car in British Columbia
- Buying a Used Car in Alberta
- Buying a Used Car in Quebec