Car Buying Tips For Canadians: Do Your Research First

For those interested in buying a new car, winter is a good time to buy. That’s the good news. The bad news is that microchip shortages have reduced the supply of new vehicles and rising interest rates have made auto loans more expensive, whether you’re buying new or used.New motor vehicle sales are, not surprisingly, highest in the spring and lowest in the winter, with 2022 being a particularly miserable year for sales, figures from Statistics Canada show. Even if interest rates weren’t rising and consumers were clamouring for new vehicles, dealers don’t have many of them to sell. Persistent bottlenecks have made semiconductors hard to find, slowing the manufacture of a variety of items including cars and trucks. This past autumn, several automakers lowered their production targets because of tight chip supply and ongoing Covid issues.

The combination of Covid, supply chain issues and a chip shortage has drastically changed the auto market since 2020, said Ronald Montoya, senior consumer advice editor at Edmunds.com.

“Where there were once markdowns, there are now markups. It is not uncommon to pay over MSRP, and discounts are rare,” Mr. Montoya said in an update to his Edmunds article on how to negotiate car prices. “This seller’s market means that shoppers don’t have much leverage in terms of negotiation. These days, if you don’t like the price you’re being offered, salespeople know that there will likely be someone else who will pay that price.”

Rising interest rates are expected to make cars more expensive throughout 2023, Mr. Montoya said in a recent article, advising consumers to wait until 2024, when lower rates should allow car purchasers to refinance at a lower rate. Edmunds.com’s car buying advice pages, such as its new car listings, are available only in the U.S., but the company suggests Canadians who want its general advice simply key in the ZIP code of the U.S. city nearest them.  

Consumers feel uncomfortable when buying a car, whether new or used and car salespeople are viewed as untrustworthy. Thanks to the internet and specifically sites such as DealerRater.com, today’s auto dealers must tread carefully lest they get a bad review.

In Ontario, for example, dealers and salespeople must be registered with the The Ontario Motor Vehicle Industry Council (OMVIC), a not-for-profit corporation that administers the Motor Vehicle Dealers Act on behalf of the Ontario Government through the Ministry of Government and Consumer Services. OMVIC’s site includes detailed, unbiased advice about buying a car from a dealer, privately or online, discipline decisions against salespeople and dealerships, safety recalls and even how to attend in-person car buying seminars. Other such provincial agencies include the Vehicle Sales Authority (VSA) of British Columbia and the Alberta Motor Vehicle Industry Council.

All industry groups warn against buying used vehicles from “curbsiders” who pretend to be selling their own car but in fact are unlicensed dealers who often peddle defective cars sold as is, with no warranty or buyer protection. If, for example, the “private” seller has multiple vehicles for sale and appears to be operating a business, or is selling a car at a bargain price that is not registered in his or her name, if he or she resists requests for a CarFax report or an inspection by a mechanic, or uses a yellow mechanic’s license plate (or red/white dealer’s plate) to drive the vehicle, you are likely dealing with a curbsider. 

Should an advertisement for a specific vehicle catch your eye, bring a printout of the ad with you when visiting a dealership. The dealer’s advertised price should include all fees and charges they will collect, excluding HST and licensing. 

Sites such as CarCostCanada (carcostcanada.com) and Unhaggle (unhaggle.com) allow you to see the dealer invoice price, or the price that the dealer has paid to the manufacturer for the new car. Once you see the dealer price for the specific version of the vehicle you want, you add in some mandatory fees, a sales tax and a reasonable profit margin, then tell the salesperson that’s the most you’ll pay. At least, that’s the way it worked when there were enough cars around to be sold.

If you decide to finance your vehicle, remember that you won’t be allowed to sell it until it’s paid off. Until then, it technically belongs to the bank or finance company. Negative equity or being “under water” on a loan means that you owe more on a car than what it’s worth. Short term loans mean the vehicle may be paid off while it’s still in good condition, but purchasers who spread their payments out over many years may find they still owe $10,000, $20,000 or $30,000 on a vehicle that’s worth much less. When such a car is traded in, the balance owing gets added to the cost of the replacement vehicle. In extreme cases, a purchaser may end up making payments on a car that’s in the scrapyard.     

Regardless of when, where and what you buy, remember that in any transaction, knowledge is power. Don’t rush your purchase and be prepared to spend several hours researching potential vehicles, prices and dealers. Fortunately, the internet has an assortment of online resources that will allow potential car purchasers to know which vehicle suits them best, and once a specific model is chosen, exactly what they should be paying for the year, make and model of that vehicle.

As a general rule, “free” car buying advice sites are financed through advertising, or by steering their users toward selected car dealerships who have paid for access to sales leads – visitor names and email addresses – while those that charge a fee have no such connections.

Among ad-supported sites are Vehicle Market Research Canada (vmrcanada.com), which includes a variety of resources including detailed advice on buying used or new vehicles, reliability rankings, used car evaluations and links to a variety of sites showing crash test results and recalls. Kelley Blue Book’s Canadian site (kbb.ca) is also ad-driven but requires users to input their postal code. Like many other sites, Canadian Black Book (canadianblackbook.com) requires you to enter your address, email address and phone number so the site can sell your name to salespeople, who will contact you.

Car Help Canada (carhelpcanada.com) offers phone consultations with expert negotiators, vehicle and dealer recommendations and member discounts on services, with fees for a one-year membership ranging from for $65 to $90.

For Canadians shopping for a used car online, Finder.com is an aggregator that offers detailed descriptions of Canadian used car sites (finder.com/ca/car-loans/used-car-sites). Finder.com also offers links to online dealers that let customers shop, finance and get their vehicle delivered. These sites include Clutch, Canada Drives and Cardoor. As well, Finder.com lists online automotive marketplaces that allow shoppers to compare new and used cars from many dealers and private sellers but don’t directly offer financing or deliveries. Such sites include AutoTrader, Canadian Black Book and Carpages.ca. Finally the site lists private marketplaces such as Kijiji and Facebook Marketplace and Go Auto, an online network of in-person dealerships that forms a category in itself.

The Finder.com site says AutoTrader was its top selection. As of mid-October, Autotrader.ca listed 298,584 cars, trucks and SUVs for sale in Canada. AutoTrader’s safety tips page (autotrader.ca/FraudProtectionTips) warns potential buyers and sellers about common frauds and scams.

In Canada, expensive vehicles have become even more expensive. On September 1 the federal government began imposing a luxury tax on vehicles worth $100,000 or more. The tax is equal to the lesser of 10% of the vehicle’s cost, or 20% of the amount above $100,000. In the case of a $150,000 vehicle, for example, the tax would be the lesser of: 10% of the price ($15,000) and 20% of the amount over $100,000, (20% x $50,000) or $10,000. 

Electric Vehicles

As gasoline prices rose, registration of zero-emission vehicles in Canada climbed in the first half of this year, rising to almost 30,000 by the end of June from 21,000 at the end of 2021, Statistics Canada figures show. In the United States, sales of electrified vehicles were up 12.6% in the second quarter from the same quarter of 2021, figures from Kelley Blue Book show.

Demand for electric vehicles is climbing while supply is even more constrained than traditional cars. Along with the microchip shortage that affects all manufacturing, electric cars need batteries made from minerals such as graphite, nickel, cobalt and lithium in quantities that existing mines are having trouble supplying. 

My EV Purchase

When gasoline prices in Toronto soared in early June I began shopping for a fully electric vehicle. Reasoning that a used EV may have outdated technology, I held out for the newest possible model. Dealers had none in stock and were unsure when they would get one “but if you put down a deposit we’ll call you next year.” 

After two months of research using the sites above I decided on a 2023 Chevy Bolt EUV, among the cheapest EVs with an MSRP of $42,858. In early September a local GM dealership said it would be getting one by the end of the month.

Last year, GM recalled and repaired a flaw in 133,351 Bolts in Canada and the U.S. after reports of battery fires in about a dozen vehicles. Despite the 0.009% chance of a fire, in September 2021 GM asked Bolt owners to park their Bolts outdoors and at least 50 feet away from other vehicles, just in case. At the dealership, the salesman said the battery fire problem had been fixed. He did not smile when I asked if the new Bolts came with fire extinguishers.

I took delivery of my Bolt Oct. 21. The car is peppy and nearly silent, with “one pedal driving” that uses the momentum of the slowing vehicle to add back power to the battery. Until the electricians installed a 240-volt home charging station two weeks later, I had to rely on public chargers, which are few, far between, unreliable and access is sometimes restricted to the adjacent building’s employees. EV owners who find a charging station that’s working and doesn’t have a lineup should still bring a book as even the fastest take much longer than filling up at a gas station. If you don’t have a home charger, stick with gasoline powered vehicles.

Selling Your Car

Selling a car is, if you can imagine it, even more stressful than buying one. Should you post an ad online, you will be inundated with responses from total strangers, sometimes from far away. These folks seem eager to buy your vehicle immediately but before they buy, they want you to send them a vehicle history report on your car. What they don’t tell you is that hey are actually employed by these companies and have no intention of buying any cars, only in tricking you into buying their reports. For more details, visit scam-detector.com/article/car-history-report-scam.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. richarddmorrison@yahoo.ca