Transportation is an essential piece of your life in Canada. Depending on where you live in Canada, you can either have access to multiple transportation options or be limited to a few. Whether it is public transit or your own car, all options have varied costs associated with them that you will need to consider before you travel.

In this article, we will be focusing on how to buy or lease a car in Canada. Purchasing a car in Canada is one of the biggest financial decisions you will make as a newcomer. If you have decided to get a car, there are many options for buying or leasing that you should know about. 

Tips:

  • When budgeting for your car, don’t forget to factor in other additional costs that come with car ownership.
  • If you only intend to drive occasionally, consider a car rental or a car share program, which are available in most large Canadian cities. See our article on getting your driver’s license in Canada for more information on what qualifications you need to use car rental and car share companies.

Is it better to buy or lease a car?

There are two main options for getting your own car when you move to Canada – buying or leasing:

  • When you buy a car, you put down the full dollar amount of the car or take out a car loan. After these are paid, you own the car outright. 
  • When you lease a car, you provide monthly payments throughout the entire leasing period in which you drive the car, and you return the car at the end of the leasing period.

Tip: Use the Government of Canada Vehicle Lease or Buy Calculator for a detailed breakdown of the costs of buying or leasing a car.

How to buy a car in Canada

You can buy your car either new or used from a dealership, or directly from an individual seller. Car dealerships offer many vehicles to try in one place, as well as the ability to add extra options to your purchase, such as a longer warranty or an upgraded sound system. 

Private sellers offer a more casual, and sometimes cheaper, buying experience. If you find an individual seller online, it is a good practice to be wary of those who may misrepresent their product. Be sure to do a test drive and have a legitimate appraisal of the car’s value before putting your money down. There are different rules for buying and selling a car in each province and territory, so check the process from your local authority before the transaction:

Financing your car purchase

Many individuals who purchase a car are not able to put down the full cash amount upfront. Car loans are a common form of loan you can get from your bank to finance your car purchase. You can make your car loan payments monthly, and once you have paid off the loan, the car belongs to you.

Tip: Newcomers can receive personalized car financing right at the dealership. Try RBC’s dealership finding tool to locate a dealership that offers automotive financing specifically tailored for newcomers to Canada.

Here are some other benefits of buying a car:

  1. Long-term gain: The longer you have your car, the more you spread out its value.
  2. Asset: Once your car loan is paid off, your car is an asset that you can sell at any time. Keep in mind that cars depreciate in value over time.
  3. Flexibility: You get to decide when to replace your vehicle.
  4. Selling power: You can sell your car to anyone at market price.
  5. No restrictions: There are no kilometre restrictions or repair standards on a car that you own, though regular maintenance is recommended.

Tip: See RBC’s checklist for buying your first car in Canada for a complete walkthrough of the car purchasing and financing process.

How to lease a car in Canada

Another option for frequent drivers is leasing a car. Leasing is essentially a long-term rental and works quite differently than owning a car or paying off car loans. When you sign a lease for a car, you make an agreement with a dealership that you will drive and maintain that vehicle for as long as the lease states. Car leases are typically only three to four years. Lease payments are made monthly. As a lease is a legal agreement, it is difficult to break your lease before the time is up, so be sure that the lease is right for you before you sign. 

Leases allow flexibility in terms of updating your car — you only have to wait three or four years to update your car to a newer model, rather than wait until the car is run down and needs to be replaced. You will also probably have the option to buy your car at the end of your lease term for the value set out in your contract at the beginning if you decide you enjoy driving it.

Other benefits of leasing a car:

  1. You do not have to be responsible for selling the car when you are finished driving it. The car goes right back to the dealer.
  2. Monthly lease payments are often lower than car financing payments. However, if you lease a car you will end up paying more over time than if you were to buy a car and spread its value out over many years. 
  3. Lease prices already include miscellaneous vehicle charges such as freight, administrative fees, and more.

As the leased car is not actually your property, there are certain levels of upkeep that you must maintain on the car to return it in good condition at the end of your lease. The details are included in your lease contract and typically consist of a mileage limit on the car, as well as regular servicing. If you are comfortable with keeping a car in good condition, and like the idea of a short-term car commitment of three or four years, leasing may be right for you. 

After purchasing or leasing your car: Licensing and insurance

How to get a driver’s license in Canada

The first step to driving a car in Canada is getting a driver’s license. Some international driver’s licenses can be transferred over with no additional testing, while others will have to take knowledge and road tests to achieve their license. 

Tip: To learn more about achieving your driver’s license, see our article on getting your driver’s license in Canada.

How does car insurance work in Canada?

In Canada, you must have valid car insurance to legally drive. Here are the most common types of car insurance:

  • Liability coverage is mandatory for all motor vehicles in Canada. Your liability coverage will help to cover the cost of your legal expenses if you are at-fault in a car accident, as well as any damage inflicted on the body, vehicle, or property of another person. 
  • Collision coverage is optional; it provides financial help to you if your own vehicle is damaged. 
  • Comprehensive coverage is a third commonly purchased form of insurance that protects drivers against loss from nonoperational actions (e.g. your car gets keyed, broken into, damaged by weather, or more). Car insurance costs are typically on a sliding scale, depending on your age, driving record, type of vehicle you drive, how often you use your vehicle, and your location.

Tip: Getting a copy of your driving record (“driving extract”) from your home country in either French or English will help in getting car insurance and obtaining your Canadian driver’s license.

Different insurance companies may have different prices. It is a good idea to contact multiple insurance providers to make sure you get the best rate. Some provinces have government-run insurance programs, like ICBC in British Columbia, where they have a monopoly over that province’s car insurance. Once you get insurance, you will receive insurance papers. You should keep your car insurance documentation, as well as your driver’s license, with you in the car whenever you drive.

Tip: Looking to better understand the different types of insurance in Canada? Read our guide to insurance in Canada

Registering your vehicle

Once you get car insurance, you can register your vehicle at your provincial transport or service authority. You must register your vehicle as soon as possible to receive a license plate and license plate sticker for your car. Some dealerships are able to register your car for you at the time of purchase.

Each province has different guidelines for license plates, which means that some plates may look different. Not all provinces require a license plate on both the front and back—check with your transport authority when you get your license plates what the rules in your province are. 

Additional costs of driving to keep in mind

There are many additional costs of driving a car outside of your car and insurance payments. Gas or electric fuel, parking, maintenance, and car accessories can add up quickly. 

Tip: Stay on track with your budget using our monthly expenses calculator to save up for incidental car expenses.

Cost of car maintenance

Car maintenance costs can come up out of nowhere, and no one wants to be 100 kilometres away from home when a mystery error light comes up on their dashboard. Every vehicle comes with an owner’s manual that describes how often you should get regular maintenance on your vehicle for ideal performance. You can avoid larger car problems later if you deal with smaller problems first. You should get oil changes at least twice a year, as well as checking your car’s various fluids regularly.

Tip: Drive is an app that keeps track of your car maintenance needs and helps you schedule important maintenance appointments with your dealership.

Checking in on your tires

To avoid flat tires and stay as safe as possible on the roads, you should check your tires regularly and always inspect them before a long drive. You may have to get your tires rotated to make sure the tread wears down evenly, which will extend the life of your tires. There are additional costs related to tire rims and installation. 

In Canada, winter is the season of icy roads and snowstorms, which require winter tires. Winter tires can be costly, at $100-200 CAD per tire, but they will also save tread on your summer tires. Winter tires have a different type of rubber, which doesn’t compress in the cold, giving them a better grip on the road in chilly temperatures. Think about switching to winter tires as soon as the temperature drops below seven degrees Celsius to avoid being surprised with an ice or snowstorm without the proper tires. You can be fined for not following proper winter driving protocol, such as winter tires or tire chains, in dangerous areas. 

Cost of fuel

Most cars in Canada run on unleaded gasoline. The cost of gas typically fluctuates based on demand and season, so keep those fluctuations in mind when creating your budget. Some Canadian cars also run on diesel fuel. 

Electric cars are becoming more popular in Canada as they become less expensive and more environmentally friendly than cars that run on gas. Charging costs for powering an electric vehicle vary from province to province. The government of Canada does provide a financial incentive to those who choose to buy an electric car, with the goal of reducing greenhouse gas emissions.

Tip: You can see your future vehicle’s carbon footprint and compare it to other vehicles using Natural Resources Canada’s Vehicle Emission Comparison Tool.

Cost of parking

Once you get to your destination, you’ve got to park your car somewhere. Depending on where you live, parking in high traffic areas can be pricey. In cities like Calgary, Vancouver, and Toronto, high monthly parking premiums can fly above $200 CAD. Add in the occasional parking ticket, and you are looking at high additional car costs that need to be budgeted for. 

Parking apps that allow you to pay for parking from your mobile phone are in wide use across Canada’s largest cities. See a parking meter in your city to get information on pay-for-parking apps.

Cost of car accessories

Bluetooth cell phone connections, bike racks, and ski boxes can be helpful for your weekend road trip but often require not only the cost of the accessories themselves but also the cost of installation. If you plan to buy a car, ask your dealership about getting some of these accessories built into your car to save some time and money. 

 

Buying or leasing a car is a big financial commitment that newcomers should be prepared for. Do your research and speak to a financial advisor to discuss your car financing options ahead of time. Their insights can help you decide if buying or leasing is right for you, and they can direct you to dealerships where you can get a car loan or lease that fits your needs. We hope that the resources and knowledge shared in this article will enable you to confidently purchase or lease your own vehicle in Canada.

 

 

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Disclaimer:
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.