A Car Buying Story: How?

By: Michael Thornessen

So how do I buy a car once I know what I like? There are several options, plus a few payment options as well. It can make quite difference both money-wise and regarding your own satisfaction. This is what I have considered:

Buying a new car

This is the easiest option of course. It has many advantages, and a single disadvantage: you pay the price for all those conveniences. In the end this is what I did, for the following reasons:

  • I don't have to think how the previous owner maintained the car.


  • New car should be problem free for a few years longer than a used car.


  • Warranty is usually 3-5 years, or 60K-100K km, so you get to use it longer. Of course with the new car, there are less chances that you'll actually use it, but you never know.


  • If you're financing, you get a better interest rate. It ranges from 0% to 4% (currently for this year's models), while if you're buying a used car and want to finance using bank loan, the best you can get is currently about 8%.


  • If you're buying replacement insurance -- it's usually too expensive for the car older than 5 years. With the new car you can get it for a fair price for the first 3-5 years.


  • Once you decide what you want, it's easy to buy it: you walk into the dealership and within couple of hours you have the car. And in my situation that was beneficial since I did not have the car. Otherwise, this convenience can actually work against you.


  • You can get exactly the model you want, including color and other little things.


Buying a new car in a rural area

This is something I've heard of but haven't explored in full. The idea is to go out of the city to dealerships with smaller sales numbers, and try to negotiate better price with them. Now, I'm not the best negotiator, so I wasn't really counting on this option, but I tried anyway. I went 150km away and spent a day talking to dealers and did almost nothing -- I've got $250 reduction. I might have done better if I had more time and wanted to come back and spend it. But I gave up.

It can certainly benefit, but you have to be prepared to visit every dealer in your area. It's definitely not a quick win.

Buying a used car

This is certainly my favourite option, but it takes time and effort. And you can find an excellent car that is not really worse than a new one, for a low price. But you have to wait and search and negotiate. If you have a car to drive and you have the time to spend on looking for a new one, always do this. The depreciation of the new car is the biggest in the first years, so you save a bunch by buying 2-3 years old car. And sometimes those cars have very low mileage. Only beware of leased cars -- sometimes they are not maintained too well since they are being leased and the owner knows it'll be changed in a few years.

Buying a car in US

Now this is an excellent way to buy a good car and save money. Cars are generally cheaper in US than in Canada, and the difference is bigger with more expensive cars. Nowadays, with the dollars being almost equal, you save on that price difference. Then you don't pay US State tax, since you are from Canada, and you pay Canadian taxes just as if you were buying the car here. Of course, you'll pay duty fee, which is currently 6.1%. But I did the calculation, and with all the fees and taxes, for each car I looked at, you're still better off at least $1,000. I looked at Civic (saves about $1,000), Accord (saves $4,000), CR-V (saves $6,000).

Then there is another interesting perk: US and Canadian models are not always the same. There are some model trims that exist in US, but not in Canada (I suppose the opposite is true as well). For example, I looked at Subaru models and I found out that the basic Outback model in US was much cheaper than the one in Canada. And the difference was only that the US model did not have some purely convenience features -- those I did not care about. But it was $9,000 cheaper (31,000 vs. 22,000 MSRP)

Now, there are obstacles, of course. Nothing comes easy. Car makers don't like you going to US to buy the car for less money. They have priced the cars differently for US and Canadian markets and don't like you taking advantage of it. Honda and Toyota have actually told the dealers in US not to sell the cars to people from Canada. I called about 10 dealers and have been told exactly this. One guy told me that they've been doing that before but then been told that they may lose the sale authorization if they do that. So, I figured I should just try to find a dealership that hasn't been warned yet. And I did -- couple of them said they'll sell it to me without a problem. With Subaru, it seems that there is no such issue -- all of them said they sell cars to Canadians.

Then there is warranty. If you buy a new car in US, the warranty is not honoured in Canada. That means that for regular services or repairs you have to pay, or if you live close to the border, go to US every time some maintenance work is needed. This also depends on the maker: Honda and Toyota don't honour it while VW does without problem. With Subaru, I heard both yes and no, so if I had decided to go for it, I would certainly first ask dealers about it.

As an interesting side note: I've found out that some time ago, the situation regarding car imports was opposite: it was very beneficial to buy a car in Canada and import it to US. Car makers have raised the same obstacles: told the dealers not to sell cars and did not honoured warranties across the border. However, seems that Americans are more agile in these situations, so they fairly quickly formed a few consumer organizations, made a class action and forced the dealers to drop the ridiculous rules.

The process itself is not trivial -- there are a good number of steps you need to take, but it is straight forward. There are no surprises once you get all the preparation done or planned. There are good resources on the net that outline the whole process:

Importing a vehicle into Canada:

Forum discussion on car import:

Border costs:

Website dedicated to importing cars to Canada:

Info on taxes related to importing a car:

You can also hire an agency to do everything for you, but I don't really see a need for that.

Now, if you are looking for a used car (in US), you can save even more money, but you have to do more work. You have to find a way to inspect the car before buying it and you'll perhaps have to travel further for that vehicle of choice. You have to be cautious and watch for problems that do not exist in Canada such as possibility that the car was flooded in one of the floods in the south (e.g. New Orleans). But if you go trough all of that you can find an excellent deal and happily bring it back to Canada.

Paying for your car

Internet was a great help for this. First, all makers have good websites that let you calculate the prices, specific for your province, and they match exactly what the dealers tell you. Besides those, there are a lot of other useful resources on the web. Here are a few:

Canadian Black Book tells you the prices that the dealers pay you when you bring in a trade-in vehicle. Both of these links point to the same service

Toyota Black Book Link:

GMC Black Book Link:

There is also the Canadian Red Book, equivalent to US Blue Book, but I couldn't find that online. But there are other websites that tell you used car prices, such as:

VMR Canada:

What I also did is picked up the prices from Auto Trader:

Auto Trader Used Car Ads:

I picked prices for the past 5 years. It's a good way to figure out average depreciation as well.

There are also fee-based sites that will give you very comprehensive reports on new and used car values, but I did not use them.

A good way to get the realistic value for the car (even for a new one) is to go to several banks and ask them how much would they loan to you for that specific car. You give them the make, model, year and the rest (in some banks its enough o provide the VIN), and they tell you what is the maximum they'll give you on a car loan. There are good chances this is less than what dealer asks you to pay. You can then use this figure to negotiate with the dealer.

To figure out the best loans options, you can use online calculators such as this one:

Loan Calculator:

All this is really fun to do, but again, it takes time -- so don't spare it. There are only two ways: you either put in your own effort or you pay money sooner or later.

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