Buying a car is one of the biggest purchases one can make in a lifetime, and if you are buying a used car, it can be twice as daunting. But with the right information and guidance, finding and purchasing a used car can be a rewarding experience!

In this blog, we will take a good look at the details of buying a used car in Canada. From discussing the reasons for buying a used car to auto financing options in Canada, this blog will discuss the details to help you get a car that is worth your money.

Why Purchase a Used Car?

The number one reason for buying a used car is its affordability. The one-time and recurring costs of a used car are much lower compared to a new car. Here are the different ways in which a used car is more affordable:

Lower Cost

In 2024, a new car costs around CAD 66,000, whereas a used car is worth CAD 37,662 on average. What does this mean? You can purchase a used car for almost half the price of a new one!

Granted, new cars come with better features and don’t carry any hidden defect risk, but well-maintained used cars can give them a run for their money! In fact, used cars are a better option if you are a first-time driver or purchasing a car on a budget. The value for money that a used car provides is unmatched.

Lower Insurance Cost

Insurances for the new and premium cars are much higher than that for the used cars. By purchasing a used car; you can bring down the insurance cost to make it an affordable option.

Less Depreciation

Depreciation is the decrease in the value of your car due to use and wear and tear. In used cars, the depreciation is lower when compared to a new car. You might face some depreciation in the value of your car, but it will always be lower than that of a new car.

Variety of Options

Contrary to popular opinion, you have more options when purchasing a used car! Automobile buyers in Canada are limited by their credit scores and the balance required to purchase a new car. But the world is your oyster when it comes to pre-owned cars!

Since they cost less, you have the option to consider makes and models that will be out of budget in a new car. Moreover, even if you have a less-than-ideal credit score, it will not hinder your ability to buy a good used car because you will get a good deal from the dealership selling the used car. Typically, auto dealers are less stringent about credit scores than traditional financers like banks.

How to Finance a Used Car?

Assess your Budget

Assessing your budget is the most crucial part of financing any car, be it new or used. Evaluating your monthly income and your overall expenses is the first step in assessing your budget. A good understanding of your monthly budget and monthly expenses allows you to make informed decisions about your car purchase.

Prepare your Credit Profile

Your credit score has a lot of say in bringing down your interest rate. The higher the credit score, the lower your interest rate can be. Update your credit profile before you file for a loan. In case your credit score is not good, you must take all the necessary steps to improve it. One way of improving your credit score is by paying all your existing debts. Paying your bills on time and having a history of borrowing and repaying loans also improves your credit score.

Explore Financing Options

When financing used cars in Canada, one can go to traditional lenders, such as banks, to get competitive loan offers. Since commercial banks are competing with each other for the same consumers, they are likely to give a good deal with low interest rates. Get quotes from at least 3 – 4 commercial banks, compare interest rates, and choose the best offer.

Another competitive option for financing your car is financing through auto dealerships. Dealership financing is a reliable and convenient option when financing new or used cars. Dealerships are more reliable than online lenders and less strict than commercial banks. In this way, you get the best of both worlds!

Use helpful features like Car Loan Calculators to find out the terms being offered by the dealership, compare them with offers from the commercial bank, and choose an offer that checks all your boxes.

Finalizing the Deal

Once you have compared the interest rates of different financing options and chosen the best one out of them, the next step is to familiarize yourself with some of the important loan terminologies that may help you in making a rational decision.

The last step in “financing your car journey” is to verify everything and seal the deal. This may be the last step in acquiring your automobile, but make sure to check for any additional costs that might be applied to your purchase.

Finish the deal by signing the contracts after reviewing all the necessary documents. Your used car will be yours after you sign the contract. Experts recommend that it is crucial to thoroughly review all the documents related to your car loan terms and conditions, interest rate per annum, and the down payment requirements set by your dealership or lenders.

The Don’ts of Buying a Used Car in Canada

We have looked in-depth at the dos of buying a used car in Canada; now let’s take a look at the things you must avoid when buying a pre-owned vehicle:

1. Avoid making a rushed decision – Research is key when purchasing a used car! Avoid purchasing a car without doing your homework. Firstly, research local dealerships with the best reputation. If possible, take recommendations from family and friends. Secondly, research the car make and model you should purchase; this will vary from person to person according to need. Next, research the financing options available and choose the option that gives you the most for your money.
2. Avoid choosing a car for luxury features – Cars with luxury trims cost more. However, keep in mind that with used cars, the luxury features are the first ones to go. So why pay a premium for the same car with luxury trim when you can pay less for a basic version?
3. Set a budget for additional expenses other than the basic cost of the car – Keep in mind that you need to account for expenses like car insurance, car registration, and similar expenses. So, your total budget should reflect the amount you can pay to buy the car upfront plus the additional costs. If you are financing the car, your total budget should account for the monthly payment to the lender plus the insurance and maintenance costs.
4. Don’t Ignore the CARFAX Check – Get your used car inspected by CARFAX. The CARFAX report will give you the service history and accident history. Moreover, it will also tell you whether there is an existing loan/lien against the car or whether it has an unfixed safety recall. It will tell you all you need to know about the car’s health so you can make an informed decision.
5. Finally, get your car inspected by a trusted mechanic – Take your mechanic with you when you go for a test drive and let the mechanic be the judge of the car. They will inspect the exterior and interior, the engine, and the other details that will ensure that you are getting a good, reliable car that is worth every penny.  

Conclusion for How to Purchase a Used Car in Canada?

Financing a used car in Canada or any other place requires thorough research and knowledge about the financing process, topped off with careful planning. However, we hope that by the end of this blog, you may have familiarized yourself with all the intricacies of purchasing a used car in Canada. The key to getting the best offer is doing research, comparing offers, and choosing a car loan that checks all your boxes!