Guide to buying your first car in Canada

There’s nothing quite like buying your very first car. Whether you’ve just got your licence, landed a new job, or finally saved up enough for that big purchase, congratulations on this major decision! Having your own set of wheels means having the freedom to go wherever you want.

But if this is your first time buying a car, it probably feels a little overwhelming. Between figuring out financing, understanding what to look for in a reliable vehicle, and navigating dealerships or private sales, the process can feel like a lot, especially if you’re doing it for the first time.

The good news is that you don’t have to figure it all out alone. We’re going to walk you through everything you need to know to confidently buy your first car in Canada. This guide will help first-time car buyers have a thorough understanding of the car-buying process.

1. Figure out what you really need and want in a car

The first step to buying your first car is figuring out what you actually need and what you’d like to have. Choosing what type of vehicle you want or need to drive, like an SUV, car, or pickup, really comes down to how you’re going to use it day to day. Start by asking yourself a few simple questions:

• Will I use the car more for commuting, road trips, errands, or a bit of everything?

• Do I need something reliable in Canada's harsh winters?

• How much space do I need for passengers or gear?

• Am I looking for something basic, or do I want a few fun extras?

Review the list below for some nice-to-have feature ideas to help you weigh your wants vs. needs:

• GPS and touch screen features

• Sunroof

• Leather and/or heated seats

• Heated steering wheel

• Automatic sliding doors

• Phone charging jacks

• Under-seat built-in storage

• Back-up camera

• Advanced cruise control

• Lane-departure warning and assist systems

• Automatic adjustable headlights

Sorting out your must-haves from your nice-to-haves will help narrow down your options and keep you focused as you start shopping.

2. Set your budget

Before you decide to purchase a new (or used) car, it’s important to take a step back and figure out what you can actually afford. According to Auto Trader, for the first quarter of 2025, the average new car price in Canada was $65,564, while used cars averaged $36,823.

While it’s easy to focus on just the sticker price or monthly loan payment, owning a car comes with a handful of other regular expenses you’ll want to include in your budget, like loan payments, insurance, fees, and maintenance. Budget determinants—essential points to remember:

Budgeting goal for monthly car payments and expenses

When it comes to budgeting for a car, you want to try to keep your monthly car-related expenses to no more than 15% of your monthly income. That means you'll want to try to keep your monthly car payment at or below 10% of your monthly income, with another 5% or so for the extra costs that come with owning and operating a car. For example, if you earn $4,000 a month, you should aim for a car payment no higher than $400. Then, budget another $200-ish for things like:

• Registration fees

• Car insurance

• Gas

• Maintenance

This would bring your total monthly car-related expenses to (hopefully) around $600.

Registration fees

One of the first things you'll need to factor in is your licence and registration fees. In order to drive your vehicle, you'll need to obtain a licence plate and register your car with the transportation authority in your province.

How much you’ll pay depends on where you live. For example, in Ontario, registration renewal is currently free. But if you're in Alberta, the cost starts at $93 (including a service fee) for passenger vehicles. Some provinces charge annually, while others might let you register for multiple years at a time.

Car insurance costs

Maybe the most important thing to factor in is the cost of car insurance. Costs vary significantly depending on several factors, including what vehicle you drive, your driving history, how often you drive, your age, and your location. Take Ontario, for example. According to the Financial Services Regulatory Authority of Ontario, as of October 2024, the average cost of car insurance in Ontario was $2,006 annually, or roughly $167 a month.

However, if you're a new driver in Ontario, you could be paying several hundred dollars a month for your first car insurance policy. New drivers can generally expect to pay anywhere from $3,000 to $7,000 or more annually. To keep your budgeting goal within 15% of your income, this may significantly lower the amount you can afford for your monthly car payments. Contact a BrokerLink insurance advisor today to help you find affordable car insurance within your budget.

Gas costs

Unless you purchased an electric vehicle, you'll need to fill up your car with gas every month or multiple times per month. Fuel costs depend on things like:

• What kind of car you have

• How often you drive

• Where in Canada you live

For example, here was the average cost of gas in different locations around Canada in March 2025, according to Statistics Canada:

For example, let's say you live in North York, drive a 2025 RAV4, and commute daily into downtown Toronto for work. That would be roughly 22 kilometres per trip. Assuming you commute 5 days a week, you'd be looking at roughly 440 km/month.

The 2025 Toyota RAV4 has a combined fuel consumption rate of about 8.5 litres per 100 kilometres. If you take 8.5 litres and multiply it by 100 kilometres, then multiply that by 440 kilometres, you get 37.4 litres per month.

Now, take 37.4 litres and multiply that by $1.534 per litre, and you'd have spent roughly $57.37 per month on gas in Toronto in March 2025, not including any extra driving you did on the weekends.

Maintenance costs

Another thing you need to factor into your budget is car maintenance costs. While generally a car doesn't need monthly maintenance, you should be getting its oil changed every 8,000 to 12,000 kilometres, or every six months, according to CARFAX Canada. You may also need to get your tires rotated and your fluids topped up. And, unless you enjoy doing it yourself, you'll need to get your car washed at least a few times a year. Plus, you'll eventually need to replace your car's wiper blades, air filters, battery, and brake pads.

So, even in the months you're not spending money on maintenance costs, it may be a good idea to put some money aside for when these regular maintenance situations do come up.

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3. Start researching different makes and models

Finding the right car isn’t just about picking the one that looks the nicest. You'll need to do your fair share of research. A great place to start is by browsing manufacturer websites and trusted listing sites to get a feel for what’s out there. As you look around, check out both expert and real-world reviews to see how different models stack up in terms of reliability, performance, fuel economy, and overall satisfaction. A few useful resources include:

• AutoTrader.ca

• Carpages.ca

• Consumer Reports and J.D. Power

• Reddit Communities (e.g., r/PersonalFinanceCanada, r/UsedCars)

Once you’ve got a few favourites in mind, look into pricing. Don’t just go by the MSRP; look into the actual market value so you know what people are really paying. If you’re considering a used car, tools like Kelley Blue Book can help you figure out a fair price based on the vehicle’s age, condition, and mileage.

4. Choose if you want a new or used car

Once you’ve got a good idea of the kind of car you’re after and what it typically sells for, the next big question is: should you buy new or used? One of the biggest decisions you’ll make when buying your first car is whether to go new or used. Both options have their benefits and a few trade-offs. What’s right for you depends on your budget, lifestyle, and how long you plan to keep the vehicle. A quick breakdown for deciding between a new and a used car:

Buying new

If you have a good budget or plan to keep your car for many years, buying a new car can be a smart move. It’s also ideal if you want the latest features or just prefer the peace of mind that comes with a full warranty.The list below summarizes the pros and cons of purchasing a new car:

Pros

• You’ll get the newest tech, safety features, and fuel efficiency improvements

• Most new cars come with a comprehensive warranty (usually around 3-5 years)

• No previous wear and tear to worry about

• You might qualify for manufacturer promotions like cashback or low-interest financing

Cons

• Higher cost

• New cars depreciate quickly, often up to 20% in the first year alone

• Newer cars can be more expensive to insure

Buying used

On the other hand, if you’re working with a tighter budget or want to avoid long-term financing, buying a used car is often the better value. It’s also a good option if you’re buying your first car and just need something reliable to get you from point A to B. Here’s a pros-and-cons breakdown to help you decide whether to go used:

Pros

• Much lower price tag than buying a brand new car

• Slower depreciation since its previous owner already took the biggest value hit

• You might be able to afford a used, higher-end model with more features

Cons

• Depending on the car’s age, any remaining manufacturer warranty might be short (or gone)

• Older cars may need more frequent repairs or replacements (brakes, tires, battery, etc.)

• Even with a clean vehicle history, there’s always a bit of unknown when buying used, especially in private sales (that's why it's important to get a vehicle history report)

5. Explore your payment options

So you’ve found the car you want. Now, the big question is: how do you plan to pay for it? You’ve got a few options when it comes to paying for your car. Most people don't have the full amount in cash to purchase a new car, so they either go with financing or leasing. But if you do have the money saved up, a cash purchase can be the simplest route. Which method works best for you will depend on your personal circumstances. The sections below cover how to pay for a car, including financing, leasing, and cash:

Financing a car

Financing means taking out a loan to buy the car. You can do this through a bank, credit union, or directly through the dealership. When you finance a car, you make monthly payments (plus interest) until the loan is paid off, and then the car is 100% yours. Auto financing: key pros and cons:

Pros

• You own the car once the loan is paid off

• No mileage restrictions

• Helps build your credit score if payments are on time

Cons

• Monthly payments can be higher than leasing

• Interest adds to the total cost

• Long loan terms can stretch out your commitment and put you “underwater” (owing more than the car is worth)

When financing, you usually make a down payment on the car first and then take out a loan to finance the rest. There is no set minimum for the down payment, but it's generally between 10% and 20% of the purchase price of the car. Your down payment will reduce your loan amount, which can help reduce your monthly payments.

The standard loan terms for car loans used to be 60 months. However, according to the CBC, more than half of all new car loans in Canada are now financed for 84 months or longer. Longer payment periods allow for the lowest possible monthly payments, but it also mean that lenders are making more money in interest payments.

Financing example

Earlier, we told you the average cost of a brand new car in Canada is $65,564. So, let’s say you’re buying a $65,000 car and putting down $6,500. You finance the remaining $58,500 over 84 months at an interest rate of 7.08% (the average auto loan interest rate in Canada in February 2025, according to Statistics Canada).

Your monthly payment would be around $885. Over the life of the loan, you’d pay approximately $74,358 in total, which includes about $15,858 in interest. Basically, financing can be a great option if you want to own the car outright but can’t pay for it in full right away.

Leasing a car

Leasing is like a long-term rental through the dealership. You make monthly payments to use the car for a set period (usually two to three years), then return it at the end of the lease. You can also sometimes buy it once the lease is up for a pre-agreed price. However, with a lease, you have to agree to an annual kilometre limit, and you'll get charged extra if you go over it. Should you lease a car? Pros and cons:

Pros

• Lower monthly payments compared to financing

• You get to drive a new car every few years

• Repairs are often covered under warranty

Cons

• You don’t own the car unless you choose to buy it at the end

• Mileage restrictions (usually 16,000–24,000 km per year)

• You’ll always have a car payment if you keep leasing

When you lease a vehicle, you pay for the depreciation of the vehicle during the lease term, plus any fees and interest. This means you generally have lower monthly payments than you would when financing a car.

While a down payment is expected when financing a car, it's less expected for a lease. A down payment on a lease won't affect the total lease amount; however, it can help reduce your monthly payments, and it may also increase your chances of being approved for a lease if you have a lower credit score.

Leasing example

Let’s say you lease a $65,000 car for 3 years with a $6,500 down payment and a monthly payment of $450 (the average monthly lease payment in Canada, according to Clutch). At the end of the lease, you can either return the car (and lease a new one) or buy it out, usually for its residual value, which is often pre-set in your lease agreement and could be somewhere around $30,000, depending on the terms. Ultimately, leasing can be a great option if you’re okay with not owning the car and love the idea of getting to change up your vehicle every few years.

Paying cash for a car

This one’s simple. You pay the full price of the car up front and drive away debt-free. No loans, no monthly payments, no interest. Paying cash for a vehicle: what’s good and what to watch out for:

Pros

• No debt or interest

• You own the car outright from day one

• Easier transaction, especially in private sales

Cons

• Big upfront cost

• May use a large amount of your savings

• No chance to build credit through payments

Paying with cash is a great option if you have the funds and want to avoid debt completely.

6. Head to the dealership to test drive some vehicles

When you’re ready to check out cars in person, it’s a good idea to schedule appointments ahead of time. This way, you’ll know the vehicle is available and someone will be there to help you. Make sure to bring your driver’s licence, proof of insurance, and any pre-approval documents if you’re financing. Before you buy a car: essential steps:

Inspect the vehicle first

Take your time inspecting the car for any signs of wear or damage, such as:

• Uneven tread wear, cracks, or bald spots on the tires (could indicate alignment or suspension issues)

• Any puddles or stains under the vehicle (could indicate a leak)

• Mismatched paint spots or panels that don’t line up properly on the body (could indicate it's been in an accident)

Also, don’t be shy about asking questions, like the vehicle’s history, warranty coverage, and if there are any extra fees the dealer hasn't mentioned yet.

Take it for a test drive

Once you’re behind the wheel, pay close attention to how the car feels, sounds, and even smells. Ask yourself:

• Is the seating comfortable?

• Can you see clearly in all directions?

• How does the car respond to steering and braking?

• Are the gear changes smooth or rough?

• Are the features working the way you’d expect them to?

If you can, try to test drive the car on both highways and city streets to get a more comprehensive feel of how it performs. Also, if you're not confident in your car knowledge, don't hesitate to bring a friend who is. You could also pay for a pre-purchase inspection by a licensed mechanic. It might cost you $100–$200, but it could save you thousands in future repairs.

But most importantly, when you're looking at cars, don’t feel rushed. You’re allowed to walk away, think it over, and come back later.

7. Negotiate the final price for your car

Negotiating the price might feel a little intimidating, but it’s a normal and important part of buying your first car. Most dealerships expect a bit of back-and-forth, so don’t be afraid to speak up. Just make sure you come prepared. This is where step one comes into play.

Start by telling them exactly what you’re looking for. Once you’re both on the same page about the car itself, you can shift the conversation to the price. Remember, until you’re signing paperwork, nothing is set in stone, so treat this like a conversation and not a commitment.

You'll want to use the research you’ve done to back you up. Compare the dealer’s price to the car market value you found online, and don’t hesitate to ask for clarification on any fees or charges that don’t make sense. Also, here’s a good rule of thumb: be ready to walk away if the car deal doesn’t feel right. Remember, you’re not locked in, and sometimes stepping away is what leads to a better offer.

8. Get auto insurance

Before you can drive off in your new car, you’ll need to have car insurance in place. It's illegal to drive a car in Canada without insurance, even if it's just from the dealership to your house.

The type of coverage you’ll need depends on your province and whether you’re financing, leasing, or buying the car outright, but it will usually include some form of the following:

• Third-party liability coverage

• Accident benefits coverage

• Uninsured motorist coverage

• Direct compensation-property damage coverage

• Collision coverage

• Comprehensive coverage

• Accident forgiveness coverage

How to get car insurance for a first-time driver

To get your car insurance, start by shopping around to compare prices and quotes from different insurance providers. You can either call insurance companies directly for quotes or find a local insurance broker like BrokerLink to help you out. When you’re getting quotes, you'll want to have the following information handy:

• Your driver’s licence number

• The car’s VIN (Vehicle Identification Number)

• How often you’ll drive it

• Where it’ll be parked most of the time

If it’s your first time buying car insurance, you might find the prices a little steep, especially if you’re young or don’t have much of a driving history. But don’t worry, there are ways to save. Look into:

• Bundling (if you already have tenant or home insurance)

• Increasing your deductible

• Usage-based insurance

• Maintaining a clean driving record

• Multi-vehicle discounts

• Various other discounts for things like using winter tires or getting good grades if you’re a student

• Installing anti-theft devices

An experienced insurance advisor like BrokerLink can help you with this. Once you’ve picked a car insurance policy, your insurance provider will give you proof of coverage. This is something your dealer or lender will likely ask for before finalizing the sale. With your auto insurance set up and the paperwork done, you’ll officially be road-ready.

9. Taking your new vehicle home

You’ve researched, negotiated, signed the paperwork, and got your insurance sorted. Now it's time to take your new vehicle home! Before you leave the dealership or finalize a private sale, double-check that you have everything you need. That includes your:

• Proof of insurance

• Bill of sale

• Vehicle registration

• Licence plates (or a temporary permit, depending on your province)

The dealership will often handle the registration and plates for you, but it’s always a good idea to confirm this, so ask your salesperson if there’s anything left for you to do, especially when it comes to plates or insurance confirmation. If you’re buying privately, you’ll need to register the vehicle yourself at a registry office. You'll need to bring:

• Valid photo ID, like your driver's licence

• Proof of car ownership (bill of sale or transfer documents)

• Proof of valid car insurance

• A used vehicle information package (UVIP) if you're in Ontario (or the equivalent in your province if it has one)

• A safety certificate, if required

Depending on your province, you may be required to bring additional documentation. Be sure to check your province’s government website for specifics. Once everything is good to go, take a moment to celebrate and enjoy the feeling of being behind the wheel of your very first car. You've earned it.

What to do after you buy your first car

Now that the paperwork’s done and the keys are in your hand, it's time to make sure everything’s good to go. The first week of car ownership is the perfect time to set the tone for how you’ll care for your vehicle going forward. Here are a few easy tasks that’ll help you start strong:

Read the owner’s manual

It’s not the most thrilling read, but flipping through the owner’s manual can be surprisingly helpful. It’ll tell you what all those dashboard lights mean, what kind of fuel and oil your car needs, and even when to schedule routine maintenance.

Book a basic inspection or oil change

Even if the car seems to be running fine, it might be a good idea to take it in for a quick once-over (unless you had a pre-purchase inspection done). A basic oil change or multi-point inspection gives a mechanic the chance to notice any issues early, especially if you bought the car used and don’t know its full service history.

Set up maintenance reminders

Whether it’s in your phone or a sticky note on the fridge, set reminders for your next oil change, tire rotation, or seasonal check-up. Staying on top of regular car maintenance is the best way to keep your car running properly and avoid costly repairs later on.

Enjoy your new car

After everything, all the research, budgeting, paperwork, and planning, that's it. You've done it. You've bought your first car! That’s a huge milestone, and we feel it deserves to be celebrated.

So, take the long way home. Queue up your favourite playlist. Hit the drive-thru for a little treat or plan a weekend road trip. You’ve earned this. Go enjoy your new ride.

Why your credit score matters when buying your first car

When you’re buying your first car, it’s not just the car’s numbers that matter. Yours do, too, especially if you're financing or leasing. Your credit score plays a huge role in what kind of car loan you’ll qualify for, how much interest you’ll pay, and even how much you’ll be approved to borrow.

Your credit score is a number between 300 and 900 that reflects how responsible you are with money, particularly when it comes to borrowing and repaying debt. In Canada, lenders usually pull your score from either Equifax or TransUnion. Here’s a general breakdown:

• 760–900: Excellent

• 725–759: Very Good

• 660–724: Good

• 560–659: Fair

• 300–559: Poor

The higher your score, the more trust a lender will have in your ability to pay back a car loan. This usually leads to lower interest rates and better terms. Your credit score and car buying: what to know:

Why it matters when buying a car

Let’s say you’re financing $40,000 for your car over seven years. If you have excellent credit (760+), you might get a loan with a 4.5% interest rate, while someone with fair credit (around 650) could be offered a rate of 9% or higher. A $40,000 car loan with a 4.5% interest rate over seven years (84 months) would look like this:

• Monthly payment: approximately $556

• Total amount paid over the loan term: about $46,705

• Total interest paid: roughly $6,705

However, a $40,000 car loan with a 9% interest rate over seven years would look like this:

• Monthly payment: approximately $644

• Total amount paid over the loan term: about $54,059

• Total interest paid: roughly $14,059

Basically, that difference in interest could cost you thousands of dollars over the life of the loan. So, if you have a lower credit score, consider increasing your credit score to help you save.

Questions to ask a dealer or private seller when buying your first car

Whether you’re buying from a dealership or a private seller, asking the right questions can save you a lot of money and even stress. While you don’t need to know everything about cars to spot a red flag, you should try to be as prepared as possible. Here are a few questions to ask:

1. Has the car been in any accidents?

This one’s a must. Even if the car looks to be in good shape, if it's been in any previous accidents, there could be hidden damage or a risk of future mechanical issues. You'll want to ask them for a full history report, or ask for the VIN to check for the report on CARFAX Canada if you're buying privately.

2. Do you have a copy of the car's maintenance records?

A well-maintained car should have records available to show it's been properly maintained. Consistent maintenance shows the previous owner took care of the car, and it means there's less likely to be hidden issues, as a mechanic would have had the opportunity to spot any early signs of issues.

3. Can I have a mechanic inspect the car?

If the answer is no, then walk away. A seller who won’t let a mechanic look over the car might be hiding something.

4. What’s included in the price?

Don’t forget to ask about taxes, administration fees, licensing costs, or extras like extended warranties. This will help you avoid any surprises when it’s time to pay.

5. Is the car still under warranty coverage?

If it's a newer car, there might still be a manufacturer's warranty left on it. If not, you might consider buying an extended one.

Common big mistakes that first-time car buyers make

Buying your first car is exciting, but let’s be real. It’s also a bit overwhelming. With so many decisions to make, it’s easy to miss a step or rush into something you’re not prepared for. To help you avoid common mistakes that many first-time buyers make, here's how to avoid them:

Not taking the vehicle for a test drive

So you’ve done your research, the photos look great, and you’re absolutely certain this is the car you want. But while a car might look perfect on paper, you won’t know how it really feels until you’re behind the wheel. Make sure to take your time during the drive, listen for weird noises, and get a sense of how the car handles. This is your chance to spot red flags before you spend your hard-earned money.

Not researching financing options ahead of time

Many people wait until they’re sitting in the dealership to think about financing, but that’s when bad deals happen. Walking in with a pre-approval from your bank or credit union puts you in a stronger position because you'll know ahead of time what you can actually afford.

Overpaying for dealer add-ons

Dealers love to throw in upgrades or extras like rust protection, fabric coatings, maintenance packages, or extended warranties, sometimes with big markups. Some of these add-ons are helpful, but are often not worth the additional cost.

Always ask for a breakdown of what’s included, and don’t be afraid to say no. Remember, you set a budget and you need to stick to it. And if it's something you're interested in, keep in mind that you can often get the same services elsewhere for less.

Forgetting about your car insurance until the last minute

Car insurance isn’t optional, and you’ll need it before you drive off the lot. But a lot of first-time buyers forget to get quotes or even think about coverage until the very end. This can lead to sticker shock or delays in picking up your car. Make sure you compare a few insurance options early on so you’re not left scrambling at the dealership.

Learn more from BrokerLink

Buying your first car is a big step, and we’re here to help you protect it. At BrokerLink, we make auto insurance simple, personal, and stress-free. Whether you’re still shopping around or just picked up your keys, our licensed insurance advisors are ready to answer your questions and help you find the right coverage for your needs and budget. We’ll walk you through your options, explain what your policy actually covers, and help you feel confident before you hit the road.

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