Car Buying FAQ

It depends on your driving habits and goals. Lease if you drive under 20,000 km/year, want lower monthly payments, and like having a new car every 2-4 years. Finance if you want to own the car outright, drive high kilometers, or plan to keep it for 5+ years. Financing builds equity while leasing does not.

A credit score of 680+ will get you approved by most lenders with competitive rates (6-9%). Scores of 720+ qualify for the best rates (4-6%). Scores between 620-679 may require a larger down payment or co-signer. Below 620, you'll likely need subprime lenders with rates of 15-29%.

Aim for at least 10-20% down payment. For a $30,000 car, that's $3,000-$6,000. A larger down payment reduces your monthly payments, lowers total interest paid, and helps avoid being "upside down" (owing more than the car is worth). If you can't afford 10% down, consider a less expensive vehicle.

For new cars with good credit (700+), expect 4-7%. For used cars, rates are typically 1-3% higher, so 6-10% is reasonable. Credit unions often offer rates 0.5-1.5% lower than banks. Manufacturer financing promotions can offer 0-2.99% on new vehicles. Anything above 10% should prompt you to shop around or improve your credit first.

Yes, but it's harder. Options include: getting a co-signer with good credit, making a larger down payment (20%+), starting with a secured credit card to build credit first, or using a credit union which may be more flexible. Some dealerships have "first-time buyer" programs, but watch out for high interest rates.

The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) includes the interest rate PLUS fees (origination fees, processing fees). APR gives you the true cost of the loan. Always compare APR, not just interest rates, when shopping for financing. A lower interest rate with high fees can cost more than a slightly higher rate with no fees.

Aim for 48-60 months maximum. While 72-84 month loans have lower monthly payments, they cost thousands more in interest and leave you "upside down" longer. A good rule: your loan term shouldn't exceed the time you plan to keep the car. For used cars, stick to 48 months or less since you want to pay it off before major repairs are needed.

Money factor is how lease companies express interest rate. To convert to APR, multiply by 2,400. For example, a money factor of 0.00250 equals 6% APR (0.00250 × 2,400 = 6%). A good money factor is under 0.00200 (4.8% APR). Always ask for the money factor and convert it so you can compare to financing rates.

New drivers in Ontario typically pay $300-500/month ($3,600-6,000/year). Rates are highest in the GTA, especially Brampton. Factors include: age, vehicle type, location, and driving record. To lower costs: take a driving course, get added to a parent's policy, choose a car with low insurance rates, and shop around with multiple insurers.

All provinces require third-party liability insurance. Minimums range from $200,000 (most provinces) to $500,000 (Quebec has unique rules). However, experts recommend at least $1-2 million in liability coverage—the extra cost is minimal and protects you from major lawsuits. Collision and comprehensive are optional but required for financed/leased vehicles.

No, this is a myth. Insurance companies don't ask about color and it's not on your vehicle registration. What DOES affect rates: make/model, year, engine size, safety ratings, theft rates for that model, and your personal factors (age, driving record, location). A red sports car costs more to insure because it's a sports car, not because it's red.

Collision covers damage from accidents (hitting another car, tree, or object). Comprehensive covers non-collision events: theft, vandalism, fire, flooding, hail, falling objects, and animal strikes. Both are optional but typically required by lenders. Consider dropping them on older cars worth less than $5,000 if you can afford to replace the car.

Take an accredited driving course (10-15% discount). Choose a car with good safety ratings and low theft rates. Increase your deductible ($1,000 instead of $500). Bundle with home/tenant insurance. Ask about good student discounts. Get added to a parent's policy. Shop around yearly—rates vary dramatically between companies. Consider usage-based insurance programs.

Yes, you need insurance before driving off the lot. Most dealerships won't release the car without proof of insurance. Get quotes before you buy so you know the cost. You can often get a policy effective immediately over the phone. If trading in a vehicle, your existing policy can usually be transferred, but call your insurer first to confirm.

For most first-time buyers, a 2-4 year old used car offers the best value. New cars lose 20-30% of their value in the first year alone. A used car lets someone else absorb that depreciation. Consider Certified Pre-Owned (CPO) for warranty protection. Buy new only if: manufacturer incentives are strong, you want specific features, or you plan to keep it 10+ years.

Check for: rust (wheel wells, rocker panels, undercarriage), uneven panel gaps or paint mismatches (accident signs), tire wear patterns (alignment/suspension issues), all electronics working, fluid levels and conditions, and unusual smells. Always get a CarFax report and have an independent mechanic do a pre-purchase inspection ($100-200). Never skip the PPI.

In Ontario, verify registration on OMVIC.on.ca. In Alberta, check AMVIC.org. All legitimate dealers must be registered with their provincial regulator. Check Google reviews, BBB ratings, and ask for references. Red flags: pressure to sign immediately, refusing PPI, vague about fees, won't provide CarFax, or asking for large cash deposits.

Expect: Provincial sales tax (HST/GST/PST), registration fees ($50-150), documentation fee ($300-500, sometimes negotiable), freight/PDI on new cars ($1,500-2,500), and licensing. Watch out for: "admin fees," "certification fees," or dealer add-ons you didn't request. Always get an itemized breakdown BEFORE signing anything.

Generally, no. Unlike the US, Canada has no federal "cooling off" period for car purchases. Once you sign, you're committed. Some dealerships offer exchange programs (typically 7-10 days), but this is voluntary, not required by law. The only exceptions: if the dealer misrepresented the vehicle or committed fraud. Read everything carefully before signing.

OMVIC (Ontario Motor Vehicle Industry Council) is the provincial regulator that licenses car dealers and salespeople in Ontario. They protect consumers by: requiring dealers to disclose vehicle history, setting standards for fair dealing, handling complaints, and compensating victims of dealer fraud. Always verify your dealer is OMVIC-registered before buying.

Plan for 3-5 hours if buying the same day. Breakdown: test drive (30-45 min), negotiation (30-90 min), F&I office (60-90 min), paperwork and delivery (30-60 min). You can speed this up by: getting pre-approved for financing beforehand, researching prices in advance, and knowing exactly which vehicle you want.

Dealers offer: warranties, financing options, consumer protection (OMVIC/AMVIC), and trade-in convenience. Private sellers offer: lower prices (no overhead) but sell "as-is" with no warranty or recourse. For first-time buyers, dealers are safer. If buying privately, get a mechanic inspection, verify ownership, and check for liens through your provincial registry.

A common rule: your total car costs (payment + insurance + gas + maintenance) shouldn't exceed 15-20% of your monthly take-home pay. For a $4,000 monthly income, that's $600-800 total. Another approach: limit your car loan to no more than 10-15% of your annual gross income. Use our loan calculator to see exactly what payments look like.

Beyond the purchase price, expect: insurance ($1,200-4,000/year), gas ($1,500-3,000/year), maintenance ($500-1,500/year), registration ($100-300/year), parking (varies by location), and depreciation. A $30,000 car typically costs $8,000-12,000/year total to own. Budget accordingly—the sticker price is just the beginning.

Ontario's HST is 13% on the purchase price. For a $30,000 car, that's $3,900 in tax. For used cars bought privately, you pay RST (Retail Sales Tax) of 13% on either the purchase price or Canadian Red Book wholesale value, whichever is higher. This prevents people from declaring artificially low sale prices.

Common "hidden" fees include: documentation/admin fees ($300-700), freight and PDI on new cars ($1,500-2,500), OMVIC fee ($10), tire stewardship fee ($20-30), and A/C tax on new vehicles. Some are legitimate; some are negotiable. Always ask for a complete itemized list before agreeing to anything, and question any fee that wasn't disclosed upfront.

Budget $50-150/month ($600-1,800/year) for maintenance. This covers: oil changes ($50-100 every 5,000-8,000 km), tire rotations ($25-50), brake pads ($200-400), and unexpected repairs. Newer cars need less; older cars need more. Japanese brands (Toyota, Honda, Mazda) typically have lower maintenance costs than European brands.