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Steps to follow when buying your new car

  1. How to decide what new car to buy?
  2. Steps to finding the right car for you!
  3. How to decide if you need a new car?
  4. How to choose the right car for you?
  5. Decide which car you should buy?

There are endless questions coupled with quizzes, questionnaire and car compatibility tests that can be found online to help you answer that polarizing question of how to buy a new car. It’s very easy to do a deep dive into the internet ocean and not come up for air, especially if you have historically been in the market for used cars. Sure it’s not like buying a fancy phone, but let’s face it you’re not purchasing a house either.

The process of buying a car can take as little 20 mins, BUT you must come prepared with the fundamentals: Information regarding your budget, insurance, credit score, and a good grasp of your particular needs and wants. You might want a two-seater sports car, but you need to have enough room in the back to accommodate two toddlers and an infant. Make sure your vehicle is realistic and fits your day to day needs.

Budget — How much do you want to spend for you new car?

Spends some time on this question and research your own finances so the process will go much more smoothly. Figure out a payment amount you can handle prior to your search.

The 20-10 guideline
Never borrow more than 20% of your yearly net income

If you earn $400 a month after taxes, then your net income in one year is: 12 x $400 = $4,800 Calculate 20% of your annual net income to find your safe debt load: $4,800 x 20% = $960 So, you should never have more than $960 of debt outstanding. Note: Housing debt (i.e., mortgage payments) should not be counted as part of the 20%.

Monthly payments shouldn't exceed 10% of your monthly net income

If your take-home pay is $400 a month $400 x 10% = $40 Your total monthly debt payments shouldn't total more than $40 per month

Remember there is also the cost of operating your vehicle”

Keep in mind the following:

  • Maintenance/Repairs
  • Fuel (are you often on the go or just a Sunday driver)?
  • Tires
  • Parking and tolls
  • Tickets (but you would never speed or park in the wrong place – right)!

Lease or not to Lease that is the questions

Pros and Cons of Leasing a Vehicle

Pros Cons

Value: At the end of a lease, the buyout value of the vehicle may be higher than similar vehicles available.
A higher end value may mean smaller monthly lease payments.

Cost: Consumers have the option to buy the vehicle at lease end, but paying out the remaining value of the car may cost you more than purchasing a similar used vehicle

Choice: When a lease term is finished, consumers can return or buy the vehicle, or sign a lease for a different vehicle.

Extra Charges: The vehicle must be returned in a reasonable condition or else additional charges may be added for excess wear and tear. Consumers may be able to purchase additional insurance packages to cover future wear and tear.

Warranty: Leasing, like buying a new, or recent model, vehicle means it will be under warranty so repair expenses should be minimal.

Less Flexibility: If you are leasing, you do not own the car. You've made a promise to pay monthly payments over a specific period of time. These terms will be difficult to break or renegotiate without incurring significant financial costs. There are lease "take over" services available that may offer a less expensive solution to an early lease termination.

Risk: Leasing allows you to switch cars every few years without taking on the risk of low resale values.

Kilometre Limits: Lease agreements outline the maximum number of kilometres the vehicle can be driven. It will result in a penalty if over the limit. You can negotiate an additional kilometre allowance upfront before signing which may cost less than waiting until the end of the agreement.

Lower Payments: Monthly payments may be lower for lease agreements than finance agreements.

Responsibility: You still are responsible for maintenance, repairs, licencing and insurance, despite not owning the vehicle.

Replacing your vehicle frequently: Whether you finance or lease, changing vehicles every three to five years means you are always making a monthly car payment. Over the long-term this will be more expensive than holding onto a paid-up used car.

Leaving Ontario? Most agreements require permission for extended leaves from the province.

Source: OMVIC

What about financing?

Financing Agreements

If the dealer assists a consumer in arranging financing for a vehicle, it is the dealer’s obligation to ensure the consumer receives an Initial Disclosure Statement (IDS) or a Lease Disclosure Statement (LDS). Typically these are given when the consumer agrees to purchase or lease. It is an offence under the Consumer Protection Act, 2002 if the dealer fails to deliver an IDS or an LDS to the consumer at or before the time the consumer enters into the agreement.

The IDS must include:

  • What the consumer will receive from the lender, including when and how they will receive it (e.g., the vehicle, cash rebate, payment of warranty premiums or other fees, etc.).
  • The term of the agreement (e.g., three years).
  • The cost of borrowing.
  • The amortization period if different from the term (in motor vehicle transactions, the amortization period and the term are usually the same).
  • The interest rate.
  • If the interest rate may change during the term of the agreement, an explanation of those details.
  • When the lender will start charging interest.
  • When interest will be compounded.
  • Any other payments the consumer must make as a condition of borrowing (other than the interest).
  • The details of any grace period under the agreement (e.g., if there is no interest for the first year of the agreement, a detailed description of how this works).
  • The annual percentage rate.
  • Information about optional services (e.g., price, description, termination rights, etc.) if the dealer has not provided the consumer with a separate statement about these services.
  • The total of all payments the consumer is required to make.
  • If the consumer is not required to make regular payments, a description of how he or she is required to make payments.
  • An explanation of how each payment will be applied to the outstanding principal and interest.
  • Any prepayment rights, charges or penalties.
  • Required refund if consumer pays full balance early.
  • Charges the consumer will need to pay if he or she does not comply with his or her responsibilities under the agreement.
  • If there is mandatory insurance, an explanation that the consumer does not have to buy insurance through the dealer.

Including Multiple Agreements in the LDS

If the consumer signs more than one agreement (e.g., a lease and a bill of sale), the information required in the Lease Disclosure Statement (LDS) should be included in both documents to ensure there is no confusion. If it is not possible to include all the details in both agreements, the dealer could include a statement that the consumer has received the detailed information on a separate agreement (and have the consumer initial that statement).

Ultimately, it is the dealer’s responsibility to ensure the consumer has received this information in a clear, comprehensible and prominent fashion in accordance with the Act.

Source: OMVIC

Did I get a good price?

I see the price on the sticker but is that the best price?  We all like to make sure we received the best price for the vehicle we choose, but how do you know what the best price is?  OTTFACT will locate all the dealerships that have the car you choose and have them bid for your business. When you receive the choices how do you choose?

It’s important to keep in mind that an average price paid is exactly that. Some people have paid more, and others paid less. Some shoppers are only happy if they negotiate their way to a rock-bottom price. But for most shoppers, that usually isn't worth the hassle and frustration. If your price quote is above the average, it's not necessarily a reason to walk away from a deal. Here's why:

A car's price isn't the only factor that determines a good car deal. You also should look at the interest rate, the loan term, and the value of your trade-in if that's part of your deal.

Insurance – Yes you need it!

Insurance companies have online tools to reassess your costs, and you can always chat with and agent on the phone or even talk to your dealer.

Take Delivery

Taking delivery of your car at the dealership or at your home ensure that its clean and the gas tank is full. You must do a  walk-around, check for small deficiencies (scratches/dents)  that may have occurred during transport.

Take the time to have the dealership give you a run through of you new vehicle. The rundown should include showing you how to pair your smartphone via Bluetooth and demonstrating other important features and safety devices. Of course, this information is in the owner's manual. But let's face it, not many of us ever read it.

If you don't have time for a complete demonstration when you sign the contract, set up an appointment a week or so later. With the amount of technology that comes in most new cars, that walk-through is important and very useful. You'll learn tricks and shortcuts you might not find on your own.

And the only thing left to do is - Enjoy your new car.