Buying a used car instead of a new one is a wise financial decision. A vehicle loses more of its value when it's first driven off the dealer's lot than at any other stage of ownership. This is due to depreciation, which is a term for how much resale value a car loses over time. By letting someone else pay that price, you’ll come out ahead financially.
There’s another side to this, though, because 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 buying a used car in Canada to help minimize those risks, get the best deal, and make buying your next used vehicle as positive an experience as possible.
How to Buy a Used Car in Canada
- Do Your Research
- Start Shopping
- Thoroughly Investigate the Car
- Arrange to See the Vehicle
- Get a Safety Inspection
- Finalize the Sale
Do Your Research
Sifting aimlessly through thousands of used car listings makes the buying process feel intimidating. Before you even open a single ad, spend some time thinking about exactly what kind of vehicle you need, want, and can afford.
Here are some questions to ask to narrow things down:
How much car do you actually need?
One of the most important factors for long-term affordability is choosing a vehicle that’s right for your needs. When you buy a car with more space or features than you can use regularly, you’ll pay more for it up front as well as over time.
For example, if you have a family of four and are considering a three-row SUV for the space but you’ll never use the third row of seats, a larger two-row SUV will likely cost less up front and save money at the pumps. If you like the look of a Jeep Wrangler or a Ford Bronco but the most off-roading you do is the gravel driveway at your cottage, you’ll be paying a lot for capability you’ll rarely use. If you want a pickup truck for garden centre runs, a compact truck such as the Ford Maverick might serve just as well as a full-size pickup while saving a heap of money on fuel.
On the other hand, if you regularly chauffeur half a baseball team, enjoy remote camping, or haul stacks of plywood, then those more expensive vehicles very well might be worth the extra money and long-term ownership costs. Having an honest conversation with yourself can help you come to the best conclusions for your situation and budget.
What type of powertrain is best for you?
In recent years, powertrains have become an important consideration when buying a used vehicle. Most Canadians select vehicles with one of these five powertrains:
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Gas-powered vehicles, also known as internal combustion engine (ICE) vehicles. These have no electrification and run on gasoline.
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Conventional hybrid vehicles, sometimes referred to as self-charging hybrids. These vehicles include a gas engine, one or more electric motors, and a small battery. They provide improved fuel economy versus ICE vehicles but aren’t designed to drive only on electric power for long distances. They also don’t need to be plugged in.
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Plug-in hybrid vehicles (PHEVs). These are similar to conventional hybrids, but have larger batteries and can drive exclusively on electric power for some distance, usually between 30 and 80 kilometres. PHEVs need to be plugged in to maximize their efficiency, but can usually be recharged effectively with a standard household outlet.
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Battery electric vehicles (BEVs). These vehicles run entirely on electricity with no gas engine in reserve. They need to be plugged in to a charge point to recharge. You may be able to install a charging station at home, and public charging stations are also available.
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Diesel-powered vehicles, fueled with diesel instead of gasoline. Diesel engines are most commonly found in trucks and larger SUVs, and are usually more efficient than gasoline for long-distance highway driving, heavy towing, and serious off-roading.
In general, the more electrified a powertrain is, the more efficient it will be. Conventional hybrids and PHEVs offer better fuel economy than conventional gasoline vehicles while retaining the convenience of filling up at a gas station. Some drivers may feel ready to give up on gas entirely and choose a BEV.
However, electrified vehicles tend to cost more up front, even when used. They’ll return some of that investment in fuel savings, but it’s important to consider how long you expect to own the vehicle and think about how long it would take for any fuel savings to make up for the price difference. If you drive a lot and will own the car for years, an electrified vehicle will be worthwhile. If not, paying more up front may not make as much sense.
What performance-related features are essential to you?
Do you need a lot of ground clearance? All-wheel drive? Lots of storage space? These attributes tend to resonate with Canadians, since we deal with winter weather. In this case, an SUV or a pickup truck is likely what you're looking for.
Don’t assume this needs to be the default, though. If you mostly drive in urban or suburban environments, a sedan, a hatchback, or a minivan that’s in good shape and has a quality set of winter tires will likely do the job just as well, and these body styles are often available at lower prices.
What extra features matter most to you?
Do you want your next car to have 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 remember to look for them as you’re browsing car ads. By the time you get through several dozen listings, you'll be glad you did.
How are you going to pay for your next car?
The question of how to pay for your next car isn’t just about securing the car itself. It’s also about making sure your budget can handle its ongoing maintenance, fuel costs, and insurance.
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 bear in mind that older vehicles tend to be less fuel efficient and are more likely to need repairs. Make sure you have a budget with room for higher fuel costs and money set aside for unexpected maintenance, since you won’t have a warranty to fall back on.
If you're looking for a newer car with more features, it will be more reliable but will also cost a lot more up front. This likely means you'll need a car loan, which can be arranged through the dealer making the sale or through your own bank. It's a good idea to check with these institutions before you start to look through listings so you’re clear on what you’ll qualify for, what the interest rate will be, and how much you can afford.
Is your car buying budget realistic?
Now that you have a handle on what you want and can afford, compare your budget against your wish list. Is the price range you're shopping in still realistic? For example, if you need a three-row SUV and your budget is $10,000, you’ll likely need to compromise by choosing an older vehicle with fewer features. But if you have $30,000 to spend and a smaller SUV will work for you, you may be able to shop for a more fuel-efficient hybrid with things like all-wheel drive and heated seats.
Once your desires and expectations reasonably match your budget, make a list of some popular models in the vehicle segment you want that include the features that interest you. We have plenty of buying guides on CarGurus.ca to assist you with this step, such as The Cheapest Hybrid SUVs in Canada, The Best Used Cars in Canada for Under $10,000, The Best Used Seven-Seat SUVs in Canada, and more.
Start Shopping
Now that you know what you're looking for, you can be more targeted as you begin to search for your next car.
The safest bet is to buy from established used car dealers, either directly or through online vehicle listing sites such as CarGurus.ca. 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, 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.ca 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 sellers
Private listings for used vehicles are common online on general classified sites or social media. It's wise to approach these listings with caution, particularly those that seem to be posted by individuals but turn out to be businesses when you investigate further. These sellers are known as curbsiders. They illegally flip cars for profit, often using misleading listings or attempting to sell cars with serious issues, such as concealed crash or flood damage, tampered odometers, or salvage titles.
Buying from a registered dealer gives you recourse if the terms of the sale turn out to be misleading. In Ontario, you can report these issues to the Ontario Motor Vehicle Industry Council (OMVIC). Similar organizations exist in B.C. (Vehicle Sales Authority of BC (VSABC)) and Alberta (Alberta Motor Vehicle Industry Council (AMVIC)). In other provinces and territories, you can report disputes with car dealers to your jurisdiction’s competition bureau. But if you get scammed in a private sale, the only way to get your money back is to take the seller to court—and that’s if you can locate the seller at all, as curbsiders have a habit of disappearing once a scam is successful.
Before getting invested in any used car listing, ask the seller about the condition of the car, its registration history and warranty status, including any extended warranties, whether service records and a vehicle history report are available, and whether the seller is an individual or a registered car dealer. It's good to get this information up front so you can check that it aligns with what you learn about the car throughout the sales process. If you sense 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 buying your next car from a registered dealership, you might want to consider trading in your current car as part of the sale. This is the most convenient option, because you don't need to spend time selling your old car yourself. The value of your trade-in is calculated against the total value of the new car on your invoice, which saves money in sales taxes.
However, even though the salesperson at a reputable dealer should offer a fair price, their aim is still to make a profit. This means you won’t get as much money from a dealership as you would by selling your car privately. If you’ve got the time to invest in creating the used car listing, negotiating with potential buyers, and handling administrative tasks such as completing contracts and transferring ownership, it may pay off to handle this process yourself.
In short, if your goal is to maximize the amount of money you get for your used car, it pays to list and sell it privately. If you don't mind getting a slightly lower price but saving time and hassle, use your vehicle as a trade-in.
Thoroughly Investigate the Car
Once you find a vehicle that interests you, follow these steps to investigate it thoroughly before you commit to a purchase.
Verify the car's fair market value
If you found the car listed at CarGurus.ca, you’ll find 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 elsewhere, do some research online to find the fair market value for the vehicle based on its model year, odometer reading, trim level, features, and condition. This will help to confirm that the asking price is fair.
Check how much you can expect to spend on fuel
Before you even arrange a test drive, look into the vehicle’s expected fuel economy. Natural Resources Canada has an online fuel consumption search tool for every model year dating back to 1995. As you consider the car’s affordability, compare it to other vehicles that are similar in age and class, and keep in mind that cars become less fuel-efficient as they age, so older models are likely to burn more fuel than the NRCan estimates.
Investigate the vehicle’s safety ratings
Take a moment to search for the safety ratings of the vehicle you’re considering at the Insurance Institute for Highway Safety (IIHS) and U.S. National Highway Traffic Safety Administration (NHTSA) websites. You’ll learn how safe the car will be in a crash as well as how effective any onboard safety technologies are relative to other vehicles in the industry. In particular, look for Top Safety Pick and Top Safety Pick+ ratings from the IIHS, which are given to the vehicles that perform the best in crash testing.
Ask for the vehicle history and maintenance records
As you get closer to setting up a test drive, ask the seller to send over a vehicle history report and any available maintenance records. Verify that the car’s vehicle identification number (VIN) matches the one on the documents provided.
If you’re buying a used car in Ontario, the seller is required to provide you with a Used Vehicle Information Package (UVIP). This is available from ServiceOntario and provides ownership and registration information, lien details, and other key vehicle information. In other provinces, you'll need to order this report yourself, which can be obtained from several online providers such as AutoCheck or CarVertical, or a CARFAX report.
A vehicle's status should be listed as none or normal. If you see the status listed as salvage, irreparable, or non-repairable, walk away from the deal immediately. Cars with these statuses are uninsurable unless you're willing to jump through the hoops required to return them to rebuilt status. Rebuilt or stolen status are serious red flags, too. With a rebuilt car, you have no way of knowing how well the work was performed. If you buy a stolen car, it will be seized at some point and you’ll likely be left with nothing.
It's also very important to check the vehicle history report for lien information. If debt is owed on the car, 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—for example, the VIN or odometer reading don’t match the vehicle history report, or the car has been in an accident the seller didn't disclose—it's time to pull the plug.
Arrange to See the Vehicle
If at this point the vehicle seems worth pursuing, negotiate to meet with the seller for a test drive. If it's a private sale, be sure to meet up in a busy public place rather than at a residence or an isolated location. Take someone with you if you can, or at the very least let someone know where you're going for safety.
Check for damage
Before getting into the vehicle, check the exterior for undeclared damage, including all four wheels and all glass. Look for things like scratches and dents, rust, cracked glass, bulging or cracked tires, and missing trim. Make sure the car's stance is level to check for obvious frame or suspension damage.
Check specifically 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 may be difficult or impossible to register, depending on how it's been branded and the rules in your province.
Take the car 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 such as blind spot monitors, and seat adjustments to ensure everything is working as declared.
Get a Safety Inspection
In a pre-purchase inspection, a licensed 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 (SSC) 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 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.
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 yourself. In most cases, emissions tests are no longer required when transferring car ownership in Canada.
Be skeptical if the seller provides an inspection report for you. When you don't know the seller or 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 trusted, licensed mechanic.
Finalize the Sale
Once you've factored in what you've learned from the checklist above and negotiated a price, it's time to pay for the car, collect a bill of sale, and register your new vehicle. It’s normal for a seller to request a deposit to secure the purchase while you finalize the arrangements.
The steps to finalize a sale vary by province. You will be required to arrange proof of insurance before the vehicle can be registered. You should also be prepared to pay either HST or your province’s retail sales tax (RST). 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. If you buy privately, don’t pay the sales tax to the seller, because you'll be required to pay the full amount when you register the vehicle. The amount of sales tax charged is usually based on either the purchase price or the vehicle's wholesale value, whichever is higher.
There are exceptions to paying sales tax in some provinces, but these are usually limited to gifts from spouses or other close family members. Research the rules in your province in advance so you're not met with any surprises when you complete your vehicle registration and pick up your licence plate.
