A newcomer's guide to buying a car in Canada

This blog was originally published on March 6, 2024 and was updated on January 30, 2025.

When you first arrive in Canada, it won’t take you long to notice that the country is filled with many communities spread out over a vast mass of land. Depending on where you live within the country the need for a vehicle changes. Living in rural communities or suburbs it almost feels impossible to live without a vehicle, while our bigger metropolitan cities like Toronto have more public transit friendly infrastructures.

Even if you live in a particularly walkable environment, you may still need a vehicle to access certain services, commute to school or work, take kids to their activities, or for road trips to explore what this beautiful country has to offer.

Once you’ve decided that owning a car is right for you, here are the basics of what you need to know when buying a car as a newcomer to Canada.

How to choose the right car

The first step to buying a car is figuring out what kind of car you need. The biggest consideration in choosing a car is the decision of whether to buy used or new, which isn’t always straightforward.

1. Save money by buying used

Recent data from AutoTrader shows the average selling price of a new car in Canada is $66,550. That’s well over double the median income for recent immigrants. The most popular SUV in Canada, the Toyota Rav4, starts at $36,620 before taxes – that works out to over $40,000 in most provinces.

Used cars are more affordable than new cars, but a shortage of new vehicles has kept prices higher than they’ve been in the past. Depending on the make and model, a five-year-old used car will cost about half of what the same car would cost new. According to AutoTrader, the average price of a used car in Canada currently sits at around $35,754.

Also read: What is the total cost of ownership for a car?

You will likely be able to get a better deal on a used car by buying privately from an individual rather than through a dealership. If you choose to purchase a car this way, be alert for common scams. Check with your province’s Ministry of Transportation for guidelines on how to safely buy a used car to protect yourself.

Also read: Buying a used car from a dealer vs. private seller

Whether you buy used or new, you should know that car prices are negotiable in Canada. Unlike many purchases where haggling is forbidden, car sellers expect to negotiate with customers to reach a suitable price. Think of the sticker price of a car as a starting point and ask for a better deal.

2. Test and verify a used car’s condition

Whether you’re buying privately or from a dealership, you should always independently verify the condition of a used car – and know that even if it’s passed a provincial safety inspection that doesn’t necessarily mean the vehicle is in good mechanical condition. 

You should always test drive a vehicle before buying it. Make sure to take at least 15 minutes and use the vehicle on a variety of roads including city streets and highways. Check for any warning lights, excessive wear on the seats, pedals, and steering wheel, and any signs that the car may not be in ideal shape. 

If you’re buying an older used vehicle, you should also consider having it inspected by a trusted mechanic. A mechanic can help ensure the vehicle is in good working order, identify any upcoming maintenance that may be required, and verify that the car doesn’t have any safety issues. Most mechanics will charge a nominal fee for this service, which is well worth it to avoid potential issues.

3. Avoid leasing

An alternative to purchasing a new car in Canada is leasing one. Many people like to lease their car because they can easily upgrade to a newer model every few years.

There are a few downsides to leasing a new car, however. The first is that leases are nearly impossible to get out of. If you decide you want a different car or can’t afford it anymore, your options will be limited.

Another downside to leasing is that there are often extra fees that you may not expect. Most leases limit the number of kilometres you can drive and charge hefty fees if you go over. You can also expect to be charged to repair any damage to the car when you return it, which could end up costing you thousands of dollars.

The biggest downside, however, is that leasing a car is almost always more expensive in the long run than financing a purchase. While lease payments may be comparable to loan payments, the entire amount is an expense. Despite a vehicle being considered a depreciating asset it will still maintain some value so at least when you purchase a car you can convert that remaining equity towards your next vehicle purchase.

Also read: Leasing vs. financing a car (and how it affects your insurance)

4. Consider the warranty and maintenance costs for older vehicles

Most new cars in Canada come with a warranty of three to eight years, during which the dealership will repair any mechanical failures for free. To maintain the warranty, you’ll need to stick to the manufacturer's maintenance schedule which will call for regular oil changes, inspections, and other routine work that may or may not be necessary. 

Whereas a used car costs less to purchase, it will likely be more expensive to maintain. In many parts of Canada where winters are cold and roads are salted for traction, cars wear down quickly and begin to fail by the time they’re about 10 years old. Experts recommend setting aside at least $100 per month to pay for repairs to your car as it ages.

Decide how you’ll pay for your car

When you buy a car in Canada you have a few options as to how to cover the cost. You can pay the full amount in cash, or borrow the money and pay off the loan over a period of up to eight years. These options both apply whether you purchase or lease a vehicle.

The easiest way to get financing to buy a car is through the dealership. Many dealers offer incentives to buy new cars in the form of lower financing costs. Well-qualified borrowers can get a much better interest rate on a loan for a new car than for a used car. Dealerships also offer longer terms on new car loans (up to eight years), which can help reduce the amount of your monthly payment to the point where the cost of a new car appears equal to the cost of a used one. 

If you’re new to Canada and haven’t established your credit score and history, it may be difficult to get financing for a new car. Many used car dealers offer special financing for people with limited credit history, but with strict terms that may be difficult to meet. For example, you may be asked to make a down payment of as much as 50% and pay a high-interest rate that would compare more closely with a credit card than a traditional auto loan.

An alternative to dealer financing is to arrange a car loan directly with a bank. It’s a bit more difficult to arrange a loan this way, but you may be able to get a loan with better terms. And there’s a lot of upside to knowing exactly how much you can spend before you set out to make a purchase.

Also read: What’s better: dealership vs bank auto loans

It’s also worth noting that your car loan itself will affect your credit score. The amount you owe affects your debt service ratios, and owing too much relative to your income can make it difficult to get credit cards, mortgages and other loans. Your regular payments will also be tracked by the credit bureaus, who will ding your score if you miss payments. If you’re curious what your auto financing needs could be, check out our auto loan calculator.

Prepare to pay taxes

New and used cars in Canada are subject to sales taxes which range from 5% in Alberta, to 15% in the Atlantic provinces. This table breaks down the sales tax rates on new and used cars in every Canadian province.

When buying a used car, you may have to pay sales tax on the book value of the car, rather than the amount you actually paid for it. British Columbia, Ontario, Quebec, and the Atlantic provinces all charge tax on the greater of the book value or the actual sale price. 

If you’re buying a new car at a dealership and trading in a used one, you may get a tax break on the value of your trade-in. For example in Ontario, if you’re buying a $25,000 car and trading in a used car for $12,500, you would only pay sales tax on the remaining $12,500 H2: Protect your car with the proper auto insurance

Every province and territory in Canada requires you to have a minimum amount of car insurance before you get behind the wheel. The penalties for driving without insurance are severe – in Ontario, you can be fined up to $25,000, lose your license for a year, and have your car impounded for up to three months.

Besides the potential for fines and headaches, insurance is valuable protection for you and your vehicle. In Canada, car insurance covers a few major categories:

When financing or leasing a vehicle collision and comprehensive coverage could be mandatory additions to your auto policy as part of your financing terms or lease agreement.

To simplify all this, Canadian car insurance companies offer “All Perils” coverage that combines all the coverage you need for your car into a single product. Choosing all perils coverage also entitles you to the cost of replacing or repairing your car after an at-fault accident. This kind of coverage may be required by the lender if you finance your car.

Some provinces have public car insurance systems where there’s a single insurer you’re required to use. In other provinces, private car insurance companies can compete for your business – this is the case with the Ontario auto insurance and Alberta auto insurance systems. Be sure to take the time to compare car insurance quotes to make sure you’re getting the best deal.

Consider the additional costs

In addition to your car payment, maintenance, and insurance, you’ll probably discover there are a few other expenses involved in owning a car in Canada. Be prepared to pay for the cost of:

• Fuel: The average cost of gas in Canada is approximately $1.50 per litre as of January, 2025. Based on a typical car and 20,000 kilometres driven per year, you’ll likely pay in the neighbourhood of $200 per month for fuel.
• Licensing and registration: Each province has its own vehicle registration program, the cost of which is up to $200 per year. In most provinces, you’ll pay a fee to register your car when you buy it and renew your registration every year.
• Parking: Depending on where you live, parking can be expensive. If you live downtown in a big city, prepare to pay up to $400 per month for parking.

Between interest, depreciation, maintenance, gas, insurance, and other expenses, it costs an average of approximately $1,843 per month to own a car in Canada ($1370 total cash expense). 

Can I buy a car and bring it to Canada?

If you already own a car, or would prefer to buy one in your home country, you may be wondering if you can bring it with you to Canada. 

According to Transportation Canada, most vehicles sold in countries other than the United States and Mexico cannot be imported into Canada. That’s because the Motor Vehicle Safety Act doesn’t allow you to modify such a vehicle to meet Canadian safety standards.

Also read: The insurance implications of exporting a car to the US

If your vehicle was purchased in the US or Mexico, you may be able to bring it into Canada – but it may be more trouble than it’s worth. Among other requirements, you may have to apply to US or Mexico customs to export the vehicle and you will be required to pay taxes to bring the vehicle into Canada. Additionally, the vehicle must pass an inspection within 45 days of being imported and it will be your responsibility to ensure that it meets all Canadian standards.

The exception to this rule is if you’re visiting Canada for a short period of time. You may be able to bring your own vehicle if you’re on a work permit, student visa, or otherwise visiting temporarily. The car cannot remain in Canada after you leave, or if you end up staying longer than you originally intended.

Can I buy a car as a non-resident of Canada?

Yes, non-residents of Canada can buy a car in this country, although there may be some additional hurdles to clear before you can do so.

First, you’ll need a valid Canadian address where you can register the vehicle. You’ll also need to provide identification such as a valid passport. You may also need to have a Canadian driver’s license or an international driving permit in order to get insurance. As a non-resident, you may face higher insurance premiums and may be asked to prepay the policy in full before an insurance binder will be issued.

Another thing to consider is selling the vehicle before you leave. Other countries have different import rules and may not allow a Canadian car to be brought in on a permanent basis. If you don’t want to go through the hassle of selling your car before you leave, it might be preferable to consider other options like renting a vehicle or using ride sharing during your stay.

The bottom line

Buying your first car in Canada can give you a lot of freedom and open up opportunities you can’t access with public transportation. Just like any major purchase, it’s important to make an informed decision, which starts with figuring out how to buy a car properly in Canada.

Take your time to research the process thoroughly and make smart financial decisions like choosing a gently used car and shopping around for auto insurance quotes. Invest in the process and you can drive away confident that you’re setting yourself up for financial success.

Also read

• How to buy a used car: After the sale
• Should I buy a new or used car? 
• 10 cheapest (used cars) to insure in Canada
• Which Ontario cities have the most expensive auto insurance?