Vehicles are often the first substantial investment any of us make. How much we spend on vehicles can also vary wildly. A brand new sedan or coupe with bare minimum ad-ons will run a person well over $20,000. If you’re looking at new luxury vehicles or larger pickup trucks, that price tag can easily jump up to close to $100,000.
Buying a vehicle is a process requiring a lot of steps: from saving for a down payment to figuring out your financing options and looking through different vehicle options and deciding what works best for your lifestyle. There’s a lot to think about, so we decided to help by pointing out a few different ideas to keep in mind when saving for a new vehicle.
Take public transit while you save
Even if you already have a vehicle now, saving for a new car can easily speed up by avoiding paying extra for gas and parking. In 2017, CityNews in Toronto asked its social media followers whether they preferred public transit or driving their own vehicle. Though the opinion was split in the audience, the numbers showed a different story. Looking at the overall cost of two major daily commuter routes in the Greater Toronto Area, the cost of public transit came out to about half of what it costs to commute daily by car.
Cities like Toronto or Vancouver have commuting lines across the city and into every suburb and almost every city across Canada has a public transit system that can make commuting easier and more affordable. For example, Edmonton has park and ride stations where you can park your car all day for a fraction of the cost of parking in the downtown core (sometimes the parking is even free) and you can catch a train or a bus directly to the business centre of the city. This can substantially reduce your daily commute costs and make your savings goals a lot easier to attain.
Know the trade in value of your current vehicle
The minute a car is sold and drives off the lot, it starts to lose value. Vehicles are depreciating assets and their value is in how they help your life (like getting to work easier, seeing friends and taking road trips). This is different from investments like Tax-Free Savings Accounts which build monetary value over time. But that doesn't mean you shouldn't buy a vehicle! You just need to think differently about how the vehicle would add value to your life.
There are some free online tools you can use to get a sense of the true trade-in value of your current vehicle. Auto Trader, Carfax and Black Book Canada all have free online tools that allow you to input your vehicle’s information to see how much you can really expect to get when it comes time to trade in.
Buy used through a dealership or a private seller
New cars are pretty. They have all the neat bells and whistles and people do not exaggerate when they talk about (*sniff*) that new car smell. But remember, cars are a depreciating asset. A model one or two years older can come at a much lower price and nowadays, anyone can find a spray can of new car smell.
If you do decide that used is the best way to go for your budget, then it’s important to figure out where you want to buy. Dealerships and private sellers both have their benefits. With a private seller, you can usually get a better price on the car, have a little more room to negotiate and you won’t need to go through a credit check to make the purchase. If you’re going through a dealership, you can qualify for financing options, you can pull the full history on the car you’re looking at and even address any recalls there might be on the vehicle parts.
If you do go through a private seller, you can hire a mechanic to inspect the vehicle and ensure there is nothing to be concerned about. This is an added expense but depending on the price you negotiate, this could still come in much lower than a dealership price tag.
Do your research
If you’re trying to be savings conscious, it might be best to pass on the cars you saw on Fast & Furious. At the same time, going automatically to the lowest priced option might also not be the best use of your hard-earned money. There’s a balance to strike when it comes to your budget and getting the most out of the vehicle you purchase.
Websites like Slice and Driving.ca often publish lists of what they think are the best cars to buy in Canada. Kelley Blue Book takes a bit of a different approach. This website ranks cars by value for money, making sure that you make the most out of each dollar you spend on your vehicle. Cars and trucks are often an extension of a person’s personality so these websites help make sure the vehicle you decide on works best for your lifestyle.