New or used? What you need to know before buying a car in today’s market

Buying a car can be an expensive process. Between inflation, gas prices, supply chain challenges and insurance premiums, it can feel harder than ever to get that dream car off the market.

In fact, car sharing service Turo’s Car Ownership Index released in April found that 39 per cent of Canadians are less likely to buy a car due to the rate of inflation, while 55 per cent of respondents who currently own a car plan to stop doing so in the future.

“My philosophy around a car is like buying an asset that never increases in value,” said Alim Dhanji, certified financial planner and senior financial planner at Assante Wealth Management, in an interview with Yahoo Finance Canada.

“You really need to be sure that you need a car and that it’s the best decision for you financially (and) if you really need a car, then it’s hard to go back to not having one.”

For those who find it difficult to live without a vehicle, buying a new car is a necessary, albeit painful, process, and there are things to consider before you’re ready to take it for a test drive.

Understand the total costs of owning a car

Having a car is much more than paying for the vehicle, insurance and gasoline. There are many unexpected costs that should be budgeted for before making a purchase.

A Ratehub.ca report in January found The average cost of car ownership in Canada is $1,387 per month, taking into account all expenses including maintenance, parking and interest payments on a loan.

“Regardless of make, model or trim, all buyers should consider the price of the car, the cost of financing, the need for additional products and the value placed on a trade-in,” Dan Park, CEO of car-buying site Clutch.ca , said via email.

Cars also depreciate in value. The Ratehub.ca report found that depreciation accounts for almost 43% of monthly costs.

“See if you can get one that’s maybe a year or two old, because you know what they say, as soon as you drive a car off the lot, a lot of its value is depreciated,” Dhanji said.

New vs. used, EV vs. gas powered

There are many pros and cons when considering a new or used vehicle. A new car will cost more but is less likely to require repairs in the short term, while a used vehicle is cheaper but may require frequent trips to the mechanic.

For Dhanji, using is the best option, as long as it is lightly used.

“If you buy a car that is a year or two old, you can probably get it for a much better price and it will still be in great condition,” he said. “There are a lot of dealerships out there that certify these cars.”

The story continues

Meanwhile, Park argues that the best deals right now are in the new vehicle market, as resolved supply chain issues have led to more inventory and more business at dealerships.

“Buyers will find a wider selection and more attractive deals on new vehicles this year, a change from shortages and high prices during the pandemic,” he said.

“Many manufacturers have phased out their cheapest models, making new cars under $25,000 a rarity. Therefore, finding a good deal on a used vehicle will require more effort, especially for those who want to spend less.”

The same happens when considering an electric or gas-powered vehicle, explains Dhanji.

“The (EV) might cost a little more… but depending on how much you drive, you could actually save money in the long run,” he said.

“There are government rebates available when you purchase a fuel-efficient vehicle, as well as tax incentives. If you are self-employed or a business owner, there may be other tax incentives available to you.

Research insurance premiums before purchasing

When looking for a new vehicle, experts agree that insurance should be a priority.

For example, a Ratesdotca August report found that frequently stolen vehicles, like the Honda CR-V, could see premium increases of more than 25%.

It is for this reason that Dhanji believes that researching the vehicle and its insurance premiums is essential.

“There are insurance companies you can shop around about who will give you the best deal,” he said. “Just like when you’re shopping for a car, you can shop for the type of insurance plan that works for you and the rate.”

Park says the research is important because dropping out of an insurance plan can be challenging.

“While it is possible to cancel your insurance policy, be aware that you may face a cancellation fee,” he said. “In light of this, it is essential to carefully research and select an insurer that offers the coverage you need and that fits your budget.”

Park adds that it’s important to understand several factors that can determine a quote, including the age of the car, your own age, driving history and where you live.

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