What to look for when buying a used car

With rising new vehicle costs, buying a used car can be a financially smart and cost-effective alternative for many Canadians. According to Auto Trader, the average cost of a used car in Canada was $35,754 as of June 2024, which is far more affordable than the average cost of $66,000 for a new car.

Benefits and risks of buying a used car

Aside from the obvious price difference, used cars generally depreciate at a slower rate than vehicles fresh off the car lot, allowing you to maintain the value of your investment for longer. That said, the used car buying process does come with potential risks, such as hidden mechanical issues, dodgy service records, and more.

Before making a decision, it's incredibly important to do your due diligence and gather as much information about the vehicle you're interested in before making an offer to avoid costly mistakes. In this used car guide, we'll go over questions to ask yourself beforehand and what to look for to make a confident and informed decision.

Researching the right used car

Researching the right car before buying is essential to ensure you make an informed and satisfying choice. We will explore the actions you can take to ensure your investment decisions are confident and well-informed for the long term:

Step 1: Identify your driving needs

As with any purchase, when you're buying a used car, you need to make sure it matches your driving habits and lifestyle. For example, if you're mainly commuting in urban areas like downtown Toronto or Vancouver, where start-and-stop traffic is common, opting for a fuel-efficient model that's compact may be ideal, such as a Toyota Corolla or a Honda Civic.

In contrast, those with families and pets who require more space and live in areas of Canada that experience harsh weather conditions will likely benefit from a more rugged vehicle with all-wheel drive, such as a Subaru Outback or Jeep Grand Cherokee.

Step 2: Research ownership costs and reliability

Furthermore, researching ongoing maintenance costs and potential repair expenses, you may need to fund. For example, some luxury vehicles like BMWs and Range Rovers may have an affordable price tag attached to them, but may require expensive repairs and maintenance.

Ensuring that you research these factors when buying a used car will give you a better idea of what your needs and budget are.

Step 3: Request and analyze a vehicle history report

If you're looking to buy a used car from a private seller, ask them for a vehicle history report. A vehicle history report details the car’s life, from the accidents it has been involved in, its service history, if there’s a lien registered against the vehicle, the recall history on the model, as well as a list of its previous owners.

For example, if the car was involved in a car accident, the report will state the date and location of the accident, as well as the damage that was done.

Most used car dealerships provide one for free. However, you can also search for a vehicle history report online using the vehicle identification number (VIN). Checking a vehicle history report can also provide you with information about the following:

Age and depreciation

Furthermore, knowing the age of the used car is also important, as it directly correlates with value. Since cars depreciate rapidly, up to 25% in the first year alone and up to 60% in the first five years, understanding the car's age will help you.

If the used car is still relatively new, such as one to two years old, then you can still expect it to depreciate in value significantly. Alternatively, if the used car is old, perhaps four or five years old, then most of the damage is likely already done. This might make it a better investment.

Run your VIN to make sure you're covered

In Canada, we recommend running the VIN through a service like CARFAX. The CARFAX Canada Vehicle History Report not only reveals the information listed above but also calculates an estimated value for the vehicle based on the information found in the report. Depending on what you find in the report, you might be able to use it to negotiate for a better price.

Step 4: Understand market value and pricing tools

Understanding how market value is calculated can help you secure a used vehicle at a fair price. Tools like the following are a convenient way to search and gain insight into fair market prices for a specific make and model of the car you're interested in:

1. Kelly Blue Book
2. Canadian Black Book
3. Online Classified Ads

One thing to keep in mind is that supply and demand in your region can also play a role in the used car market value. For example, if you live in Alberta, where there is heavy snowfall and freezing conditions, rugged vehicles with four-wheel capabilities may have higher prices, given the demand for them. As some peace of mind, according to Auto Remarketing Canada, prices for used cars fell 12.1% in 2024, making buying a used car slightly more affordable.

Regardless, remember to research thoroughly beforehand, as it will give you a stronger negotiating position and reduce your risk of overpaying for a specific model. Further, you could even hire an appraiser to assess the car for you. If you learn that the seller’s price is above average, you might be better off looking elsewhere.

You can also try to negotiate for a lower price using the research you collected, indicating that the value of the car is lower than the sale price. Ultimately, if the car is in poor condition, such as if it has suffered expensive damage in repeated car accidents, its value is likely to be lower.

Step 5: Watch out for vehicle history red flags

As we said, reviewing the vehicle history of any used car you're considering is essential, as it could bring up red flags that indicate hidden issues. Some warning signs to look out for include:

Inconsistent or missing paperwork and service records

Ensure the used car has vehicle ownership documents and past service history records that are complete. Any missing records could conceal previous damage or potential legal issues.

Unusual noises and smells

Strange noises coming from the engine, burning smells, or musty odours within the interior could suggest there is a mechanical issue or other problem.

Signs of previous car accidents

When conducting a visual car inspection, look for uneven paint colours, misaligned panels, unusual wear on the tire tread depth, and other oddities that could suggest the used vehicle has been in a previous accident.

Title problems and title washing

As we said, using the Vehicle Identification Number (VIN), ensure there are no liens on the vehicle. The presence of one means that someone else may have an existing financial claim on the vehicle. Additionally, be cautious of title washing by verifying the used vehicle's title history across several provinces. Title washing occurs when a car is moved across provinces to hide past damages or salvages.

Vehicle inspection checklist

Visually inspecting a used car's exterior and the car's interior before making an offer on it can help you get a clear picture of whether the vehicle is in good shape. Whether you choose to do it yourself or have a mechanic inspect it on your behalf, a thorough inspection can help you make an informed decision you feel confident in. Here's what you should look out for:

Exterior vehicle inspection

Conducting an exterior vehicle inspection is crucial for several reasons, especially to confirm that the car is in good condition before making a purchase. Here are key aspects to examine during an exterior inspectio

Vehicle body

Check the general body of the vehicle, looking for any dents, scratches, misaligned panels, gaps, or rust. Structural damage can be a major red flag that there is something severely wrong with the used car's ability to function safely and correctly. You can also evaluate the paint colour to ensure that it is the same on every part of the car.

Open and close the doors, hood, and under the trunk

Test out all car doors, as well as the hood and the trunk. Open and close each, and pay attention to whether you have any difficulties doing this, as well as if the hinges seem loose. Check the transmission fluid levels and colour. When new, transmission fluid should be a dark red colour. Darker transmission fluid suggests that it needs to be changed.

Further, make sure the vehicle has had a recent oil change by removing the dipstick. A lighter engine oil is a good indication that the car oil has been recently changed.

Window and windshield glass

Inspect the glass on the windows and windshields to make sure there are no cracks or chips. Even a small chip can lead to larger problems, so if you notice anything, speak to the private seller. Also, ensure that your windshield fluids are topped up.

Suspension

Walk around the perimeter of the car to find out if it’s sitting level. You can also give a slight nudge to each corner of the car to see how many times it rebounds or bounces. One bounce typically indicates that the shock absorbers are working as they should be, whereas multiple bounces might indicate a problem.

Brake lights

Test out all headlights and brake lights to ensure they are working. You should also test the indicators. Visually inspect the lights for cracks, fog, and discolouration.

Tires, wheels, and brakes

Pay special attention to the tires on the car, as these can reveal a lot about its condition. Examine the tread, not only to look for tread depth (remember that anything less than 1/16” in tread depth should not be driven), but also to look for how evenly the tread has worn.

You should also check the wheels for any scuffs, cracks, or dents. Don't forget to conduct a thorough inspection of the brake pads for thickness and signs of heavy wear that could be a safety risk.

Electrical system (battery)

Generally speaking, the electrical system in a car will control your radio, heating, air conditioning, windows, and more. To ensure the car battery is charged, look for dim lights and vehicle stalling. You can check the car battery voltage using a multimeter.

Car's Interior vehicle checklist

Just like an exterior vehicle inspection, checking the car’s interior is equally important to ensure it is in good condition before making a purchase. Below, we outline key aspects you should consider or examine during your interior vehicle inspection:

Odour

Take note of how the car smells when you sit inside it. Do you notice any strong odours, like food or cigarette smoke? Alternatively, if you notice a musty or mouldy smell, it could mean that there is water damage or leaks, so it’s best to check for wet patches. Remember that water damage can be expensive to fix, while strong odours can be difficult, if not impossible, to eliminate entirely.

Driver's seat

Test out all seats, including the rear seats. Check for signs of wear and tear on the upholstery, like rips, tears, or stains. If you have a child and plan to put a car seat in the used car, bring it with you and install it to ensure it fits.

Gas and brake pedals

Test the gas and brake pedals to see how they feel. You don’t want the gas pedal to be too sensitive, and you don’t want the rubber on the pedals to be worn in. If they are, this likely indicates high mileage.

Instruments and controls

Turn on the engine to check that the ignition switch is functioning as it should. We also recommend starting the car without starting the engine to check that all warning lights turn on correctly. Next, test out the various switches and buttons. This is also a great time to test out the air conditioning, heating, seat heaters, etc.

Sound system and infotainment system

Turn on the radio or try connecting your mobile phone via Bluetooth to test out the car’s sound system and infotainment system.

Ceiling

When sitting in the car, check the ceiling for stains or sags. Either can indicate that there is water damage to the vehicle. If the car has a sunroof, check that it opens or closes properly. Same with a convertible. You should also check the convertible roof for tears.

Trunk

Open and close the trunk and look for strange odours or signs of water damage here. Use your hands to inspect the carpeting in the trunk as well. If there is a spare tire, inspect it the same way you did the other tires on the car, with extra attention to rust or other damage that arises from an improperly stored tire.

Mileage

Mileage is another important factor to consider. Since a car’s lifespan is often measured in mileage rather than age, knowing the mileage of the car you want to buy is extremely important information. High mileage suggests more wear on the vehicle components, while a low mileage means the vehicle hasn't been driven as often.

Ideally, the mileage on the vehicle should be as low as possible. The lower the mileage, the higher in value the car is likely to be, and the longer it is likely to last. Don’t simply trust that the seller barely drove it. Instead, ask for the exact mileage, divide it by the age of the vehicle, and compare that to the average mileage per year for other vehicles.

Electric vehicles

A report on the Canadian Q4 2024 used car market states that the market for used hybrid and electric cars is expanding. If you are considering an electric or hybrid car, check that the battery is charged before you take it for a test drive. This will allow you to determine how quickly the battery is drained.

You should also ask the previous owner or used car dealer questions about how the seller has been charging the vehicle, so that you know what kind of power outlet is required.

Mechanical issues (DIY vs. professional inspection)

If you're looking for a used vehicle, mechanical inspections are essential to determining the car's condition. Inspecting the vehicle yourself is possible with previous experience and knowledge. It can also help you save money on hiring a professional.

However, if you don't feel comfortable determining whether the vehicle is in good shape, an independent inspection is highly recommended. They can do a more comprehensive examination of the brakes, transmission, and engine.

A professional inspection from a mechanic can also evaluate the overall condition of the vehicle's drivetrain, examine the suspension components, and look for wear on the brake pads. This can help in identifying problems that might not be obvious or right away during a DIY inspection.

The test drive: what to look for

Just as if you were buying a new car, you should ask the seller if you can take a test drive. This is the best way of gauging how the vehicle handles. Here's what you need to look out for during your test drive:

Acceleration, brakes, and handling

Observe the car's handling, braking, and acceleration at different speeds throughout the test drive. The vehicle needs to accelerate smoothly and brake well. The car may have engine problems if it has trouble accelerating, so pay close attention to this.

Additionally, look for any odd squeaking, whether the steering wheel pulls to one side of the road, as this could indicate there is something wrong with the vehicle's alignment.

Unusual noises

Again, unusual noises as you're test-driving the vehicle, such as grinding or whining, could suggest problems with the steering or suspension system. During tricky manoeuvres like turning, ensure the vehicle feels stable and that the power steering is responsive.

Transmission slipping

If you're looking at a manual used car, transmission slipping while you shift gears could cause the vehicle to hesitate or lurch. You should be able to change gears smoothly and without any strange noises.

Different driving conditions

See how the vehicle handles on the highway while you are travelling at higher speeds. The car should be stable and not wobble. If the car vibrates significantly or if it pulls to one side of the road, this again could suggest there is something wrong with the vehicle alignment.

After that, test the vehicle in stop-and-go traffic. The brakes should engage without squealing, and the vehicle should accelerate smoothly. You should also take the vehicle on uneven roads, as it will determine how well the suspension works and whether it is able to absorb bumps without causing any noises or making the driving experience rough. Ultimately, driving in different road conditions will help you point out any potential problems.

Understanding vehicle ownership costs

When buying a used car, either from a private seller or a car dealership, it's important to consider upfront and long-term costs. Here's what you need to consider:

Depreciation & resale value

All cars depreciate. But unlike buying a new car, used vehicles generally depreciate less quickly per year. Regardless, some cars hold their value better than others. For example, Honda and Toyota experience lower depreciation rates than luxury cars, which can depreciate up to 40% in the first year.

Cars from reliable manufacturers that are in high demand, have low miles on them and are well-maintained tend to hold their resale value better. Furthermore, cars that are in high demand, such as those with outstanding performance, innovative safety features, and optimal fuel efficiency, are likely to retain their worth better over time. That way, if you do sell your used car in the future, you can do so at a good price.

Maintenance and repair costs

Maintenance and repair costs are inevitable when owning a vehicle. The truth is, maintenance and repair expenses can vary widely depending on the make and model of the vehicle you purchase. For example, luxury vehicles like BMWs and Mercedes will have higher upkeep costs compared to a more standard vehicle like a Toyota or Honda. This is largely due to the cost of parts, labour, and the systems used in luxury cars. On the other hand, standard cars tend to be less expensive to upkeep as their parts are more readily available, and the complexity of their systems is generally lower.

Fuel efficiency

Fuel economy has a direct effect on your recurring expenses. Better fuel-efficient cars are more economical because they use less fuel, allowing you to drive longer distances without refuelling as frequently.

Car insurance considerations

Once you've purchased your used vehicle, you'll need to purchase a car insurance policy to drive on public roads. If you're getting your first car insurance plan, you'll be happy to know that insuring a used car compared to a new car can result in more affordable auto insurance rates.

That said, your premiums will vary depending on your risk profile, which takes into account several factors, including your age, driving experience, where you live, and more. However, if you're looking at a sedan, you'll likely pay more to insure it than an SUV, given its safety ratings.

Furthermore, note that obtaining insurance before or after purchasing a car is optional. However, most provinces have a grace period that allows you to purchase the coverage after the fact. Further, while car insurance requirements vary across Canadian provinces, some common ones you'll legally require and may want to consider include:

• Young drivers insurance
• Liability car insurance
• Uninsured motorist coverage
• Direct compensation - property damage
• Accident benefits
• Accident forgiveness
• Collision insurance
• Comprehensive insurance

Contact BrokerLink for more information on provincial regulations!

Negotiation strategies for the best price

Regardless of whether you're buying a used car from a dealership or in a private sale, knowing how to properly negotiate can help you save thousands of dollars. Use the following advice to ensure you keep more money in your pocket at the end of the day:

1. Research: Start by doing your research online to determine the car's market value. To make your search easier, use resources like the Canadian Black Book or Kelley Blue Book. With this information, you can relay data to the seller and potentially negotiate a lower price tag.
2. Highlight issues: Once you've inspected the used car, you can use this information to your advantage. For example, if the oil needs changing or the tires are worn, leverage this information for a lower price. Consider negotiating other aspects of the deal, such as including winter tires, a car warranty, or a free oil change.
3. Walk away: Sometimes, private sellers aren't willing to negotiate a lower price, even if you've done your best to do so. Remember that walking away is okay.
4. Dealership sales: If you're buying a used car from a dealer, remember that the first price they give you isn't always the best one. Be polite but firm when negotiating, and don't be afraid to take your time to think things over. Additionally, ask to see the "out-the-door" price. This price includes all processing fees, used car taxes, and other expenses. Doing so can help you avoid hidden costs.
5. Shop at the right time: If you're set on getting a car from a dealership, remember that they're more likely to negotiate toward the end of the month or the end of their yearly quarter to hit their sales targets.
6. Compare prices: Don't forget to compare offers from multiple sellers to give yourself more options, but also see whether you can get a better deal somewhere else.

Paperwork and legal considerations

To ensure your buying process is as smooth as possible, it's worth noting the following:

Key documents to verify your purchase

Make sure you receive a copy of the car's title or ownership certificate, along with a signed bill of sale. Confirm that the vehicle identification number (VIN) on the documents provided matches the car itself. This step prevents vehicle registration issues and verifies that the seller is legally allowed to sell the vehicle.

The VIN can also help you confirm whether or not you're buying a used car that was in an accident that rendered it a rebuild.

Avoid scams and car fraud

Authenticate the individual's identification using a government-issued ID and make sure their name matches the ownership documentation to avoid scams. If you're buying from a private seller, meet in a public place and use secure payment methods.

Next steps

Once you've purchased the car, you'll need to register it with your provincial licensing office to complete the transfer of ownership. Don't forget to get insurance immediately afterwards. You'll need your proof of purchase, a title transfer, and a safety inspection. If you already have a previous auto policy, you can carry it to your new car.

Further, if needed, conduct routine maintenance on the car to ensure it operates correctly. To maintain the car's value, keep thorough records of all maintenance and repairs conducted from then on out.

How BrokerLink can help

Buying any type of car is a major decision, but this rings especially true for a used car. While used cars may be cheaper to purchase for your first car, you are at an increased risk of something going wrong. That is why you should thoroughly inspect the vehicle before making your purchase.

Whether you need insurance for first-time car buyers, have questions about when your policy ends, or have other inquiries like how to safely drive on the highway, how to invalidate your car insurance, or what to do when selling your car, the experienced brokers from BrokerLink are here to help!

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