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 due to a process known as depreciation, and it’s prudent to let someone else pay that price. But taking on a car later in its life cycle means you don’t know how it’s been driven or maintained, which opens up the potential for greater risk and higher repair bills. Here’s a step-by-step guide to buying a used vehicle in Canada to help minimize that risk and make buying your next vehicle as positive as possible.
How to Buy a Used Car in Canada
Do Your Research
Sifting through thousands of 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:
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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.
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Do you need a lot of ground clearance? All-wheel drive? Lots of storage space? If any or all of these 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.
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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 load or towing capacity? It’s not a bad idea to pull some fuel consumption 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.
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What extra features matter most to you? Do you really want Bluetooth connectivity, heated seats, satellite radio, or other nice-to-have features that aren’t standard in every vehicle? Write these things down so that 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.
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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, which may mean you’ll need to seek out financing. 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 and get attached to a vehicle that you can’t fit into your monthly budget.
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Are your expectations reasonable? Now that you’ve got your needs and wants laid out and have a handle on what you can afford, it’s time to consider whether you’re being realistic with the price range you’re shopping within. You’re not likely to find a three-row SUV with low kilometres or the latest high-end features on vehicles with pricing in the $10,000 range, for example. Balance your expectations if necessary, 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 sometimes 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 for the 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.
Private listings are prevalent online on general classified sites or social media, but it’s wise to be cautious of anonymous listings in particular. 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, flood damaged, or have been subject to odometer tampering, among other issues, leaving the buyer with no protection and no recourse. This doesn’t mean every private seller is a criminal, but it does mean extra diligence is called for from the prospective buyer.
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 investigation process. If your intuition senses that something is off, don’t hesitate to walk away. There are plenty more cars out there!
Investigate Thoroughly
Once you find a car that seems like a good prospect, you’ll want to follow these steps to investigate it thoroughly before you commit to a purchase.
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Verify its 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.
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Verify fuel consumption and safety ratings. Double-check the fuel consumption rating with Natural Resources Canada for the make and model in question, and check the safety rating for the vehicle and model year online with the Insurance Institute for Highway Safety (IIHS), to ensure you have a solid picture of the vehicle you’re considering.
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Give it a visual inspection. 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.
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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 glass panels 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, and do not proceed if there’s any doubt – a flood-damaged vehicle is very risky and is uninsurable in some jurisdictions.
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Take it for a test drive. Test driving the vehicle thoroughly should involve both city streets and highway if possible, with opportunities to climb a hill, accelerate and brake both 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.
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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 done so to 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; you’ll need to order these reports yourself in other provinces, which can be obtained for free from several online providers.
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, this is the time to walk away. The exception would be if you’re willing to jump through the hoops required to return a salvage car to rebuilt status and prove that it’s road-worthy before registration.
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 that the seller didn’t disclose – pursuing the vehicle further may not be in your best interest.
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Get a safety inspection. This involves having a licenced mechanic put the vehicle on a hoist to check for things like hidden rust, bad brakes, broken lights, or other things that may need to be repaired for safety. In some provinces, a safety standards certificate is required before you can register a vehicle, but 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. This could be cause to walk away from a deal, or it may simply give you leverage in your price negotiations.
This type of inspection only verifies factors relating to roadworthiness, not things like whether the air conditioning or radio are working, so don’t forget to check those things on your own during the test drive. Be skeptical if an inspection report is provided for you; this is something you’ll want to pay for on your own and have performed by a mechanic you trust.
Finalize the Sale
Once you’ve negotiated a price with the seller based on a balance of the asking price and what you learned through your test drive and inspection, and once the previous owner has been paid, it’s time to collect a bill of sale and register your new vehicle. The steps to finalize a sale vary by province, but you’ll need 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, though they can get significantly higher in British Columbia 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, though exceptions can be made in some provinces based on condition of vehicle or whether it was a gift from a spouse or other close family member. Do some research on the rules in your province so that you’re not met with any surprises when you go to pick up your licence plate.