If you are a new immigrant to Ontario or are planning to do so, you might be concerned about transportation. Having a car is incredibly convenient to help you or your family drive to work, school, to the store, or on longer trips. But if you are unfamiliar with how buying a car works in Canada, you won’t know about what you have to do and how long everything would take in order to own a vehicle. That’s why we created this guide to help you through every step of the way.
Step 1: What Documents Do I Need to Buy a Car?
First, you’ll need to know what important documents you need in order to legally own a car. There are three main types that you will need: an Ontario Driver’s License, a valid car insurance policy, and your vehicle registration. You will need to get them in that order, because in order to register ownership of a car you need car insurance, and in order to get car insurance you must have a valid Ontario driver’s license.
1.1 Driver’s License
Depending on your home country and how much driving experience you have, you might be able to exchange your license for an Ontario Driver’s License. If you can’t exchange it, you might be able to get credit for the experience you already have. To exchange your foreign license or get credit for the experience, you will need supporting documentation. You will need three pieces of acceptable identification, your Canadian Citizenship card, your foreign driver’s license, and an original and official abstract document or letter. The abstract must be written within in the last 6 months and include the following:
- Letterhead, logo, emblem, coat of arms, or symbol from the authority that issued your license
- Your legal name and date of birth
- The date you first got your license
- Your driver’s license number, class, current status (active or expired) and expiry date
- The date the abstract, letter or document was created
For the Driver’s Abstract, people immigrating from Japan can get their abstract from the Japanese Consulate, whereas people from the United Kingdom can get it from the Driver & Vehicle Licensing Agency (DLVA). If you want to see where to go for your home country, you can check Ontario’s DriveTest Centre guide here.
The Driver’s Abstract is not a necessary document to get a license, it is only if you want to claim more than one year of driving experience in order to immediately obtain your full-G license. You can still get credit for your license experience to skip part of the Ontario Graduated Driver’s License program and get a G2, for example.
1.2 Car Insurance
Before you can get Car Insurance in Ontario you have to have a Driver’s License. After that, you will need to provide only a few types of documents and information:
- The driver’s license number for everyone in your household who would use the car
- The make, model, mileage and registration number of the vehicle you want to insure
- Certificate of any driver’s education or safe driving completed in the last 3 years (optional if you want a better insurance rate)
You can also submit your previous Canadian driving record (international driving experience is not taken into account). Canadians with previous insurance policies can also submit official letters from previous insurance companies to act as records of your good driving experience, but odds are as a new immigrant to Canada you will not have any such experience in the country to use.
1.3 Vehicle Registration
To finalize your legal ownership of any vehicle you buy, you have to register it with the government of Ontario. To register your vehicle you will need the following:
- Your driver’s license and the 15 digit registrant identification number (RIN) on it
- Proof of a valid and current insurance policy
- Certificate of sale and ownership title also known as the pink slip
- License plate number
If you are buying a new vehicle from a dealership, they will usually file the vehicle registration for you. If you are buying a used vehicle from either a dealer or a private seller you will also need to include the Used Vehicle Information Package (UVIP), Safety Standards Certificate, and Drive Clean Emissions Test.
Step 2: Should I Buy a New or Used Car?
When you start thinking about what vehicle you want to buy, the biggest thing to consider is whether you want to buy a new vehicle or a pre-owned one. Each has their benefits and drawbacks:
||New vehicles will be more expensive||Used vehicles will have much more affordable selling price|
|Payment||New vehicles can be leased, financed, or bought outright||Used cars can’t be leased, have far fewer opportunities to get financing, but are easier to buy outright because they’re cheaper|
|Warranty||Comes with new warranties as standard so you have coverage for defects and maintenance||Only Certified Pre-Owned vehicles will come with a warranty, otherwise, you will have to buy an extended warranty as extra|
|Condition||Brand new condition, any defects covered by warranty||You will likely not know the full history of the used car and its wear and tear or mechanical issues|
|Where to buy||From a dealership only||From a dealership or private seller|
|Features||Newest features, options, tech, and safety||Older features, options, tech, and safety|
|Incentives||Can get deals from the manufacturer||Priced by the dealership or seller|
For new Canadians who just immigrated to the province, however, the advantages of new cars are offset by the higher cost. Incentives, financing and leasing might make paying for a new vehicle more manageable, but most newly arrived immigrants still will not be able to afford them for a year or two for financial reasons (see section #4 below). It is much easier to buy a cheaper used vehicle to start with so you have something to drive until you can afford a new car.
Step 3: What’s the Difference Between Dealerships and Private Sellers?
In Ontario, there are two sources where you can buy a car: from a car dealership or an individual person acting as a private seller. If you want to buy a new vehicle, you can only buy them from a dealership. You can buy a used vehicle from either a dealership or a private seller. Here’s how they each work.
When you buy a vehicle from a dealership, you will be dealing with an involved process. You are dealing with a business rather than an individual, which means they will be concerned about selling the vehicle so they can make at least a bit of a profit. Here are some of the unique elements you will deal with at a dealership:
- Pricing – things like MSRP, sticker price, invoice pricing, all-in pricing, fees, taxes, and so on.
- Financing – leases and loans will be worked out based on your credit
- Selection — dealers will have many different vehicles to choose from (new or used, different brands and models, etc.) so you can shop around
- Certified Pre-Owned — better quality and reliability due to fully documented history, also more expensive
There is also an element of negotiation when it comes to deciding the final price and terms of your purchase that you won’t experience when buying from a private seller. You won’t just negotiate the sales price, but also any financing, warranty, protection plans, and other additional costs or terms.
3.2 Private Sellers
You can only buy a used vehicle from a private seller, and you will be dealing with an individual selling the car for however much cash they want to get: no financing, no extra fees, no special pricing or sales. Private sellers will want to sell their car for as much as they can, but since they are not concerned with the idea of profit there will be a less formal process. Here are some unique elements to buying from a private seller:
- Condition — you get the vehicle as the owner chooses to sell it, good or bad
- Inspection – it is more important that you properly inspect the vehicle from a private seller than a dealership
- Purchase – you will have to buy the vehicle outright in cash and it is advisable to do it in a bank to reduce the chances of being scammed
- Tests – if the seller did not provide valid Safety and Emissions test certificates you will have to pay to get them
Keep in mind that private sellers are selling a car that they’ve owned themselves, and want to make more money than they could get by trading it in to a dealership. Because they’re not a business they won’t care about profit so you might get a better deal, but they also don’t have to worry about keeping a reputation so they might be less willing to disclose any issues with the car.
Step 4: How Does Leasing or Financing Work?
When you buy a new vehicle, you have different ways of paying for it: you can take out a lease, you can finance it with a loan, or you can buy it outright on the spot with cash. That last option is straight forward, but how leases and loans work are more involved.
To get approved for either a lease or a loan, you need to have a good enough credit score. A credit score is essentially a rating on how trustworthy you are to banks and other money lenders as far as being able to pay them back if they loan you money.
For immigrants who just arrived in Canada, you will have no credit history and that makes it difficult to take out a large lease or loan on a vehicle because the lenders will view you as unknown and risky. There are ways you can build your credit score as quickly as you can, but here are some of the basics:
- Secure Credit Cards — they are a safe way to establish your first credit history as trustworthy
- Bill Payments — always pay your regular bills (rent, energy, cell phone, etc.) on time and in full
- Smaller Loans — take out smaller loans and regular credit cards and pay them off on time and in full
However, even if you do all the right things to build a good credit history it can still take more than a year before you will have a credit score good enough to be approved for car financing. If you cannot wait that long, you can save up a few thousand dollars to buy an old used car for cash to use until you can get approved for car financing.
Car loans are by far the most common way that all Canadians pay for a new car. Let’s there’s a new car you want to buy that costs $20,000 but you only have $4,000 saved up: you put the $4,000 towards the purchase as a down payment and then take out a loan for the $16,000 left to pay. Here’s how paying off the loan works:
- Length – longer loan terms mean lower monthly payments but more total interest paid
- Interest Rate – the exact rate charged depends on your credit score and the length of the loan
- Incentives – manufacturers sometimes offer special incentives for lower loan rates than usual
Loans average around 5 years in length, though you can pay it off sooner if you want to save from having to pay more in monthly interest. When you take out a loan to pay for a new car, you own the vehicle and can do what you want without any limitations or penalties.
When you lease a new vehicle, you don’t actually own it. You are essentially renting it from the dealership. Leases are usually shorter than loans, but by the end of the lease, you either have to then buy the vehicle or walk away from it. If you walk away, the car is returned to the dealership and you then have to either lease or buy another.
Your monthly lease payments are usually lower than they would be if you take out a loan to buy the same vehicle, which is the big benefit for leasing. This is because instead of paying for the full value of the vehicle you are only paying for how much value the car loses over the term of the lease. Here’s how it works:
- You lease a new car that costs $20,000
- At the end of a 3-year lease, the car is worth $12,000
- Your monthly lease payments cover the $8,000 in value that the car lost over the 3 years
There are other factors into how much your lease payments are, such as interest, the length of the lease, and other terms you negotiate such as the annual kilometer limit.
Step 5: Are There Programs To Help New Canadians Buy A Car?
The good news is that Canadian banks and car manufacturers fully realize the issues that newly arrived Canadians face in buying a new car which can be important in helping them settle into their new lives and jobs. They usually apply either on the first car you buy or within three years of getting your citizenship.
Banks, such as the Royal Bank of Canada (RBC) and Scotiabank have programs to help new Canadians with no credit history still get approved for loans. The issue with these programs is the loans are more restrictive-the maximum loan allowed is lower, they require a bigger down payment in cash, or they have higher interest rates. But if that’s one of your only choices it might still work for you.
Almost every car manufacturer that sells new vehicles in Canada has some type of discount or incentive to new Canadians or first-time car buyers. You can either get a flat amount discounted off of the vehicle that’s usually between $500 and $1000, or they will have special financing programs like the banks to make it easier to get approved loans.