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Tips on buying a car

Let Desjardins help you make the right decisions when you decide to buy a new vehicle.

Follow these steps to make an informed decision

When buying a car, the first step is always a decision: Is it better to buy a new or a used car?

A few questions before you choose

Before buying a car, identify your needs and determine how much you are willing to pay. Here are some questions and answers to get you started.

How many kilometres will you drive in a year?
The answer to this question could influence your decision to buy or lease. Lease agreements generally include mileage limits, beyond which you pay a penalty.

Will you drive mostly in the city or on the highway?
See the technical specifications, available on the manufacturer's website, to review the car's fuel efficiency in the city and on the highway. You can also find information on the subject on the Natural Resources Canada website.

How long do you plan to keep the car?
If you plan to change cars in 3 years, it might be better to lease rather than buy.

What price are you prepared to pay?
Draw up your budget before buying. By including the cost of the car with your other expenses, you'll see how much you can afford to spend. Don't forget that driving a car involves many expenses that are not always easy to predict, such as gas, maintenance, tires, insurance, financing costs and depreciation. Learn more about drawing up a budget.

Features of new and used cars

To make an informed decision, consider how important each of the elements in the table below is in relation to your needs and budget.

  New car Used car
Price

Few choices under $10,000.

For less than half the price of a new car, you can buy a used car with more options than a smaller new car with no options or accessories.

Depreciation

Rapid over the first 2 or 3 years.

After 2 or 3 years, the original owner has absorbed much of the depreciation.

Maintenance and repairs
  • No maintenance before several thousand kilometres of driving.
  • Some manufacturers cover the cost of oil changes and tune-ups.
  • The tires, battery, exhaust system and brakes will not need to be replaced for the first few years.
  • Hard to know for sure how the car has been driven or maintained.
  • May require maintenance or costly repairs.
  • Not always covered by a warranty.
Warranty
  • Basic warranty of at least 3 years or 60,000 km.
  • Does not cover normal-usage maintenance such as brake pads or clutch.
  • Some manufacturers offer extended or supplemental warranties.
  • The original manufacturer's warranty can be transferred to the car's second owner, usually with no fee.
  • It is possible to go to an authorized dealer to buy a certified used vehicle that is still covered by the original warranty, and then extend the warranty.
Roadside assistance
  • Free access in most cases as long as the vehicle is still under warranty.
  • Some manufacturers will reimburse the charges incurred during a breakdown or make a replacement vehicle available.

Generally not available.

Choosing a car

Find the car that's right for you
Go to sites that can help you choose the car that suits your needs. Many specialized sites have tools that allow you to search for new cars, select the features you want and compare various models.

You can also go to manufacturers' sites or new car dealerships that interest you. You'll have an opportunity to choose options and get a good idea of the price of the car you want. Moreover, you'll probably find out about promotional offers in effect.

Feel free to read reviews by experts who test, compare and assess the quality of new vehicles. They are a good, neutral source of information when the time comes to make a final decision between a few makes and models.

Compare incentives
Find out about discounts and other incentives offered by manufacturers and dealerships for the model you want. You could save thousands in some cases.

Shop online before heading out
Go to used car sites or classified ad sites like Kijiji, goldseries.ca and many others. Take the time you need to shop and compare cars and prices. Most of these sites allow you to contact them by email to get more information or plan a test drive. Some of these sites also list cars sold by individuals.

Inspect the car
Always inspect the car in the middle of the day.

Keep an eye out for signs of interior trim, seat and pedal wear.

Examine the exterior to spot irregularities on the body and find out whether it has been involved in an accident.

Try to get a written report of all accidents.

Test drive the car to determine the condition of the steering, brakes, etc.

Get the car checked by your mechanic before buying it, especially when the seller is an individual, as you have very limited recourse should problems occur after the sale has concluded.

Find out the car's relative value
If the asking price is much lower than the car's market value, find out why. Sellers don't want to get $1,000 for a car that's worth $10,000, unless it has problems. EspaceAuto.com - This link will open in a new window. has a calculator you can use to find out the trade-in value of your car before going to a dealer.

Check the car's history
It's easy and it's worth the money. You can purchase a car history report (accidents, import/export, registration, etc.) for about $50 on sites like CarProof.com - This link will open in a new window..

Go to the Registre des droit personnels et réels mobiliers - This link will open in a new window. (RDPRM) site to find out whether a car was given as a guarantee or whether it is linked to an outstanding debt to avoid buying the seller's debt.

You've found a car that meets your needs and fits your budget. The only decision left is how to pay for it. Is it better to pay cash, lease or apply for financing? Each option has its own advantages and drawbacks, which is why it's important to make an informed decision.

Paying in cash Leasing Financing
If you have enough savings set aside, you could pay cash for your vehicle and avoid paying interest.

You can sign a lease agreement with a financing company or a vehicle manufacturer.

You can get the financing you need to buy a vehicle from a credit union, car manufacturer, financial institution or finance company.

Advantages:

  • No interest costs or financing charges.
  • No monthly payments weighing on your budget.
  • You are free to do what you like with the car.
  • Reselling the car is easy when you no longer need it.

Advantages:

  • A practical solution if you like to change cars frequently.
  • Normally, your car is covered by a warranty for mechanical issues.
  • No risk to the car's resale value due to a problem found in a specific model or a model's poor reputation. The vehicle is returned at the end of the lease regardless of its market value.

Advantages:

  • You pay for your car with borrowed money, allowing you to hold on to your cash reserves.
  • You own your car at the end of the contract.
  • Many lenders offer extended loan periods that lower your monthly payments to the same level as lease payments.

Drawbacks:

  • Be careful not to drain your savings. Keep some money set aside for emergencies.
  • Paying cash means using the fruit of your labours to obtain an item that will depreciate over time. Is there a better way to use that money?

Drawbacks:

  • You will probably be limited to 15,000-20,000 km per year, and going over this limit could result in high usage fees. Consider your driving habits carefully before going this route.
  • The lease may require that you take out more extensive auto insurance.
  • If the car you lease shows excessive damage or wear and tear, you must assume the cost of restoration work before the end of the lease to avoid penalties.
  • Any modification to the car is generally prohibited.
  • You will have nothing when you return the car to the dealership. You can elect to buy the car at its residual value at the end of the lease term, but this value is often inflated.
  • It can be difficult to cancel a lease.
  • You may have trouble getting a lease if you don't have a good credit history.

Drawbacks:

  • If you decide to sell the car before paying off the loan, the process may be difficult and require the creditor's participation.
  • May require a substantial down payment, as opposed to a lease agreement, which usually doesn't require one.
  • Monthly payments are usually higher than lease payments. This may have a greater impact on your monthly budget than leasing or paying cash.

Here are the main factors that could influence the interest rate you are offered.

Your lender

Unless you borrow from an individual, you will be dealing with a financial institution, a credit co-op or a manufacturer's financing department. Each of these scenarios has its own advantages and drawbacks.

The vehicle chosen

Are you buying a new, used or very used car? Often, buyers of new cars get the best interest rates, and only new vehicles generally qualify for 0% financing. Nonetheless, manufacturers sometimes try to drive sales of certified used vehicles by offering 0% financing.

Your credit rating

Borrowers with better credit ratings are offered lower interest rates, so not everyone is eligible for the 0% financing option offered by manufacturers.

The loan term

For a lower interest rate, choose the shortest repayment term possible based on your budget.

As you can see, much publicized 0% financing offers don't apply to every situation. Learn more about 0% financing.

Even under the best conditions, buying a car can be a complex process. Be cautious with all the incentive programs available that can keep you from seeing clearly and focusing on the exact product you want. Be aware of the following facts about incentive programs.

  • If a price reduction or a low interest rate seems like a good enough incentive to you, do not assume the dealership can't still do better.
  • Incentives exist to keep consumers from negotiating for a better price. They allow dealerships to sell cars at prices they would never be able to ask otherwise.
  • Read the fine print. Nothing is free! Someone has to pay for those 0% financing rates, and as a rule, that someone is the consumer.
  • The lowest rates sometimes apply only to the shortest terms (usually 3 years). For longer terms, rates tend to climb.
  • Manufacturers often exclude their most popular models from incentive programs. The incentives thus allow them to liquidate other models. Be sure to ask the dealer if the best rates apply to the vehicle and financing term you are interested in.
  • Look through the ads in your local paper to see what is being offered in your area.
  • If you already have a car and want to trade it in, wait until the last step of the transaction to mention it. You must first negotiate the price for the one you want to buy. Otherwise, it is the dealer who establishes a price based on the trade-in, rather than allowing you to make the decision to include it or not, which could be to your disadvantage.

Before you buy, prepare yourself and benefit from car shopping tools and helpful tips on EspaceAutoDesjardins.com.

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