Buying a new (or new-to-you) vehicle is a major purchase and an exciting experience often wrapped up in a surprising amount of emotion. For many people, their vehicle is more than a tool to get from A to B. They’re often an expression of personal style, a bit of a status symbol, and represent freedom. Of course, it’s important to remember that’s it’s also a major financial commitment. So, when you’re preparing to buy a car, it’s critical that you cut through the emotion, be clear-headed, and not get caught up in the hype. Otherwise, you could find yourself in over your head with a car that doesn’t meet your needs, or that you struggle to afford.
Use our Vehicle Comparison workbook (XLS) to compare costs, features and ratings of the vehicles you are considering.
Choosing your vehicle
There are lots of things to consider when deciding which vehicle is right for you. Here are some things to consider:
How much car can you afford? One of the first decisions you should make is how much you’re going to spend. Many advertisements feature attractively low payments, but think about the total cost you are willing to spend on the vehicle, not only the payment amount you can afford.
Keep the full cost of ownership in mind. Remember that the price of a vehicle does not end when the sticker price is paid. You’ll also need to include the cost of ongoing maintenance, repairs, registration, insurance, inspections, parking, and fuel into your vehicle budget.
How much car do you need? Ask yourself how far you will be driving on a typical day, what road conditions you will likely encounter and how much cargo you will regularly carry. For some a compact car will fit the bill, but for others you may need a minivan or SUV to get the job done. Don’t be swayed by offers to test drive the new luxury SUV or sports car if it doesn’t fit your actual needs or budget!
Compare your top choices. Once you’ve decided what type of car is right for you, and have narrowed down your top choices, make sure you shop around, ask questions, and test drive the vehicles before you buy. Remember, vehicles can be purchased in different combinations of price and options packages on the same make and model.
Compare warranties. Be sure to also compare the manufacturer’s warranty offered on your top choices and make sure you understand what is (and is not) covered and for how long. Carefully review details of any extended service contract the dealership may offer you and always get those details in writing. It’s much easier to prove what was promised if there is ever a dispute.
Own or lease?
Unless you have enough savings to purchase a vehicle outright—which very few New Brunswickers do—your choices come down to financing (to ultimately own your vehicle), or leasing.
When you finance a car to own it, you take out a loan for the entire value of that car. You may have to make a down payment, and will likely be charged interest for borrowing that money.
With a lease, rather than borrowing the full price of the car, you borrow only the amount the car will depreciate over the term of the lease. Your regular lease payments are therefore typically lower than loan payments.
If you took out a five-year loan to purchase the car outright, your monthly payments would stop after five years. With a lease, after the lease term is up (generally between two and four years), you could choose to trade in your car for a new one, and continue making monthly payments, or you may buy out your lease.
If you decide to finance rather than lease a vehicle, remember: choosing the right finance option is about more than making sure the monthly payment fits your budget. Smart borrowers also consider the following:
The total cost of borrowing
When you borrow money to buy a car, the overall price increases. On top of the cost of the vehicle you will be paying interest and may also be required to pay additional finance charges. Before signing a finance agreement, make sure you understand how much it will cost you.
The term of the loan
The term of a loan is the amount of time it will take to pay it back. Most dealerships now offer terms up to eight years. Generally, the longer the term, the lower the monthly payments. It may seem like an attractive option to stretch your loan to lower you monthly payments, but that may harm you financially in the long run. The value of a vehicle can depreciate quickly. By extending the term of your loan, you will pay more interest in the long run, and you may end up owing more on your vehicle than it is worth, if you want to trade it in or sell it before the loan has been paid.
Vehicle manufacturers sometimes offer discounts to boost sales or clear out leftover stock. Customers may be given the option of choosing between a low finance rate (sometimes as low as 0%) or a cash rebate. To get the cash rebate, you either have to pay for your vehicle in full or finance the purchase through a financial institution. This 0% financing may sound attractive, but it may not be the best deal for you. Sometimes the cash rebate offered by the dealership will be higher than the cost of financing the vehicle at a financial institution. Compare costs and interest rates to determine what the best is for you.
Your ability to pay back the loan
Are you confidant in your ability to repay the loan? The cost of your car loan may not change throughout the term, but it is possible that the cost of owning the vehicle and carrying other debts may rise. If interest rates go up, your mortgage or other debts may also go up. Maintenance costs may increase over the life of the vehicle as well. Make sure you have room in your budget to adjust for potential increases in costs and in your other debt payments.
How Much Does it Cost to Finance a Vehicle?
When financing the purchase of a new vehicle, don’t fall into the trap of considering only the amount of each payment. Sure, that’s an important piece of the puzzle, but you also need to consider what your financing will cost you in the long run.
How much does the car really cost? To make a truly informed decision, you need to know what the grand total will come to after all taxes, fees and financing charges are included. Not only will you have to pay for the cost of the vehicle (including taxes, freight, and other fees) you may also be paying interest on your loan and may need to pay other finance charges. Don’t be swayed by the sticker price or a low monthly, bi-weekly, or weekly payment amount.
How long will I take to pay back the loan? New Brunswick buyers now have the option to finance a vehicle with terms of up to eight years. It may seem like an attractive option, but you may end up hurting your bank account in the long run. Because vehicles depreciate quickly, they may not hold their value throughout the life of a long-term loan—so if you want to sell your vehicle before the loan has been paid, it’s likely that you’d be selling it for less than what you owe on it. Also, you may end up paying for costly repairs while you are still making monthly payments.
Are you confident that you’ll be able to pay back the loan? You may be confident in your ability to make your monthly payments now, but would you be able to meet those obligations if your financial situation changed? If you have other debt (such as a mortgage, or other variable rate loans) these payments will increase if and when interest rates go up. Before taking on more debt, make sure you have enough wiggle room in your budget to prepare you for this potential increase.
Automobile Insurance is mandatory in New Brunswick. All vehicles registered and driven in the province must have certain mandatory minimum levels of insurance coverage to protect the public.
Third Party Liability Insurance protects you as a vehicle owner and as a driver if you injure someone or damage someone else’s property with your car. In New Brunswick, the minimum coverage required is $200,000. Purchasing additional insurance above this minimum can offer you greater protection in the event the damage caused is higher than the minimum required coverage. The cost of increasing your Third Party Liability coverage is usually not significant. You can also purchase additional protection by adding endorsements or optional insurance to your policy.
Shop around and compare insurance policies before you buy. The amount you pay for premiums should not be your only consideration. It is important to find the policy that provides you the right kind of coverage to meet your needs. Before making any decisions on additional coverages, you should speak to a licensed insurance representative. Rates vary based on the type of vehicle you are insuring. If your new vehicle is bigger than your last, or has more bells and whistles, your insurance rates may increase.
Before you buy automobile insurance, make sure the seller is licensed. In New Brunswick, insurance products can only be sold by individuals licensed with FCNB. You can verify that the person selling your insurance policy is licensed by checking the following website: Search the Insurance Licence Database
Tips to Protect Yourself When Buying a Vehicle
Buying a New Vehicle:
When you purchase a vehicle from a dealer in New Brunswick, you are protected by certain rights under the Consumer Product Warranty and Liability Act (CPWALA). CPWALA provides consumers with protection and their options for seeking compensation or remedies when goods are found to be defective or fall short of reasonable expectations. This applies to new and used consumer goods sold by a dealer. A dealer is someone who specializes in the type of product being sold. You can’t sign away your protections under CPWALA by signing a waiver or disclaimer. This legislation does not apply to private sales between individuals.
Buying a used vehicle:
Buying a used car comes with a whole other set of details to think about and iron out before you commit. When you purchase a used vehicle you have the choice to purchase through a dealership or through a private sale. Be aware when you purchase a vehicle through a private sale, you do not have the protection or the right afforded under the Consumer Product Warranty and Liability Act, and once you drive the car away, it is yours and you become responsible for all costs and repairs associated with the car.
Here are some other considerations to keep in mind when buying a used vehicle:
The registration status and Vehicle history. If the vehicle has been reported stolen or damaged, service New Brunswick may have record of this. A vehicle that has been registered as “salvage”, “non-repairable”, or “rebuilt”, may not be able to be licensed or insured. Check this information with Service New Brunswick before purchasing.
Liens. Verify that there are no liens on the vehicle to ensure that a third party is not owed money for the vehicle. For example, if the owner used it as collateral for a loan that’s unpaid, the vehicle can be repossessed from you even if you paid full price to the seller. You can check for any liens with the Personal Property Registry System (fee ranges from $5 to $10).
Deposit. If you provide a deposit, ask if you will get it back if you decide not to buy the car. Get this information in writing.
Guarantees and warranties. If the seller is offering any guarantees get them in writing. Ask if there’s a warranty on the vehicle and review it to ensure you understand what is covered and for how long. Get any details in writing.
Inspection and maintenance. Ask where the previous owner had the car serviced and inspected, and ask to see any service records or receipts.
Get a second opinion. Consider bringing the vehicle to a trusted mechanic to have them inspect the vehicle for damage before you purchase it.
Test drives. If the seller refuses to allow you to test drive the car before you buy it, walk away. If the seller pressures you into a quick sale or insisting on a cash sale, reconsider before being bullied into a purchase.
Price and mileage. Does the price sound too good to be true or does the mileage seem too low for the age of the vehicle? If it sounds too good to be true it probably is. If you’re uncomfortable or skeptical of the answer, walk away.
Avoid vehicles damaged by flooding
After the flooding that’s recently affected many New Brunswick communities, New Brunswickers who are in the market for a used car should be on alert for water-damaged cars. Water damage goes far beyond rust. It can impact important mechanical and electronic systems (including airbag controllers) and cause corrosion. A car that has been flooded may appear to be in perfect condition, but could start having problems later on.
Insurers will usually take flood-damaged cars off the road so they can’t be resold. However, water-damaged vehicles can sometimes get moved far from their original location following a large storm, and sold to unsuspecting drivers.
Indicators of a flood-damaged vehicle
A registered dealership has an obligation to disclose if a car has sustained water damage. To know if a dealership is registered, you can ask to see their Motor Vehicle Dealer Licence. Be aware – a private seller has no obligation to disclose if a car has sustained water damage. Here are some indicators to watch for:
- A musty odour in the interior, which can sometimes be covered with a strong air-freshener or shampoo.
- Upholstery or carpeting which is mismatched, loose, new, or stained.
- Damp carpets.
- Moisture, sitting water, or debris in the trunk or spare tire area.
- Rust around doors, inside the hood and trunk latches, pedals, on unfinished metal surfaces.
- Bubbling of paint in areas that are not exposed to weather.
- Mud or silt in the glove compartment or under seats.
- Brittle wires under the dashboard.
- Fog or moisture beads in the interior or exterior lights or instrument panel.
- Seat mounting screws that have been tampered with in an effort to dry the carpets.
- Water lines in the engine compartment.
- Silt and sand in nooks and crannies.
- Check the oil – even a small amount of water in the oil will make it murky.
- Check the air filter – if there are water stains on the paper filter walk away.
How to handle an accident
Don’t panic. When you’re in an accident, emotions, confusion and stress can make it difficult to think clearly. It’s important to remember, as difficult as it may seem, to stay calm and not argue with or shout at the other drivers or passengers. Take time to record the details of what happened using our Auto Accident Report Form so you can give your story to the police.
Avoid further damage. If it’s safe to do so, move your vehicle to the side of the road. If you can’t move your vehicle, turn on your four-ways (hazard lights) or use warning cones or emergency flares.
Don’t get scammed. Unfortunately, some con artists may prey on those who’ve just been involved in an accident. Don’t be pressured by unauthorized tow truck operators. If they’re demanding payment up front, or trying to pressure you into letting them tow the vehicle to a garage or body shop of their choice, you can say no. Ask the police for the name of an authorized tow truck operator and have your vehicle towed to a garage you are comfortable with, a police compound or to your home until you can speak with your insurance company.
Record all important information. Exchange information with the other drivers involved and record the contact information of any witnesses. Keep a copy of our Auto Accident Report Form in your glove compartment and use it to record important information at the scene.
Call your insurance company. Report the accident and get clarification on what’s included in your policy. Some drivers may choose not to file a claim and to pay out of pocket for any repair work that needs to be done. Be cautious because there’s no guarantee that the driver responsible for the accident will agree to the quote you receive, or that they will pay the repair bill when it comes due.
It is important that you:
- Do not leave the accident scene.
- Do not move anyone who appears to be injured.
- Carefully consider before settling the cost of damage directly with the other driver(s).
- Do not sign anything other than a police report.
Treat car ownership as the serious responsibility it is
If all this makes it seem like buying and owning a car is a big deal, that’s because it is. So in closing, remember to always be prepared, educated, and aware when it comes to buying and owning a car. It’s a big financial commitment, and you could easily find yourself unprepared for the financial cost. But with the tips in this guide, you should be well on your way to owning a car within your means, and hopefully avoid any nasty surprises.
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