Financial Planning -> Save Money -> Buying a Vehicle
Buying a Vehicle
Probably your first major purchase in life will be a vehicle, so take your time and do it right.
 | Save up the money. Don't go into debt for a vehicle. |
| Carefully consider all options. This will probably be the first test of your financial decision-making abilities. |
| You should know exactly what the insurance, gas and maintenance costs will be for any vehicle you are considering. |
| Compare fuel efficiency for different vehicles before making your decision. This information is readily available on the internet. Estimate how many kilometres you will drive, and you can then estimate your gas costs. If a vehicle uses an average of 10 litres per 100 kilometres, and gas costs $1 per litre, then your gas will be costing you $0.10 per kilometre. A larger vehicle using 20 litres per 100 kilometres will cost $0.20 per kilometre at $1.00 per litre. |
| How much will it cost you to park the vehicle at school or at work? |
| You can save money by buying a slightly used vehicle, and still get some factory warranty. Check the sales of ex-rental vehicles. |
| Newer vehicles usually require less maintenance than older vehicles. |
| If you don't know much about vehicles, and maybe even if you do, it would be wise to have your chosen vehicle inspected professionally for mechanical problems. Canadian Automobile Association (CAA) is one organization that will do a mechanical inspection for a fee. Their website also offers tips and other help for buying new or used vehicles. |
| Do a search to see if there are any liens against the vehicle. |
| A careful inspection by an experienced auto body repair person would be advisable (this saved us at least once!). |
| In BC, you can check with ICBC to determine the accident history of the vehicle. However, some accident repairs may be done without using an insurance company, in which case the accident history is not very useful. |
| If you are buying a used vehicle, you can avoid GST by purchasing one privately rather than through a dealer or company. |
| Once you determine how much you can afford to spend on a vehicle, and what the operating costs will be, use these numbers to determine what you would have in the future if you invested the money instead. This might convince you to use public transit instead of buying a vehicle. |
We have never borrowed to purchase a vehicle, and have never purchased a new vehicle. We seem to have done well buying vehicles that are one or two years old, and still have some warranty.
However, if you are set on financing the purchase of your vehicle, make sure you know the annual percentage rate (APR) of the financing being offered to you, and explore other methods of financing.
See also our article on Rebates and PST reductions for fuel-efficient vehicles.
Check out all of our ideas for saving money and building wealth!
Tip: Pay cash, know your costs, and get a mechanic and a body repair person to check a used vehicle.
Revised: October 26, 2023