Many Quebecers will be attending the Montreal International Auto Show in the coming days to better prepare for purchasing a new vehicle. But they always ask themselves the same questions:
Should I buy new, used or rent?
Should I choose an SUV or a sedan?
Should you choose dealer or bank financing?
Let's start at the beginning: What is my budget? If you haven't done this exercise, you're a little in the dark.
“Most people consider their monthly or bi-monthly margin or the money they have left over each paycheck when setting their car budget,” notes George Iny, director of the Association for the Protection of Motorists (APA). You definitely need to determine how much you can afford, set an amount and not deviate from it when you go to the dealer.”
New or used?
According to DesRosiers Automotive, a new car currently sells for an average of $41,800 for a car or $51,700 for an SUV, and for all vehicles combined for $67,418, according to AutoHebdo.net. That's a lot of money.
Would you like to switch to used cars? The problem is that there has been a shortage in this market since the pandemic, which is exacerbated by the desire of Americans coming to us to stock up on vehicles that are less than three years old.
Many three-year-old used cars sell for the same price, often even higher than the same new model! On the other hand, insuring and financing a used car costs less, but you buy with uncertainty.
“A new vehicle should give you peace of mind for at least 140,000 km, after which further repairs will be required,” notes George Iny.
Obviously, a car purchased for $20,000 that costs $2,000 to repair is still much cheaper than a new car!
Mr Iny considers that a consumer is always at an advantage if he has the means to buy a new vehicle (or repurchase it at the end of the lease) and keep it for several years after his financing expires.
“If you drive your car on a rope for at least 10 years, it pays off big time,” he notes. But most people switch after four or five years, sometimes even before their funding expires. That's not a good idea.”
On the other hand, if you plan to replace your vehicle within four years, it is better to rent it. And by renting you can afford a more luxurious model while spreading the taxes. But watch out for mileage, high interest rates, and penalties for damage or rental disruption.
And the financing?
It used to be advantageous to finance the vehicle at the dealer instead of going to the bank. This is less clear in times of high interest rates. Buy your lender!
As a result, many consumers extend their financing to 84 months or more. Even if your payment is low, it can cost you a fortune!
It's better to tighten your belt and make higher payments over a maximum of three or four years
For example, the Office of Consumer Protection calculator (OPC: opc.gouv.qc.ca/auto) indicates that on a $50,000 car financed at 8%, you'll pay $10,829.20 in interest over 60 months .
For 36 months, the interest drops dramatically to $6,405.52. Enough to finance the sunroof or the magazines.
Do you need an SUV? A large vehicle? If you're a couple, it's probably no. If you have children, a seven-passenger vehicle like a crossover is right for you. It will be cheaper than a giant.
You need to quantify your needs. A Mazda 3, Honda Civic, Subaru Impreza or Toyota Corolla costs less to finance, insure and fuel than a Toyota RAV4, Honda CR-V or Subaru Forester.
We're easily talking about an annual difference of $3,000 for gas and $2,000 for insurance. Put that money into your RRSP, your renovations, your kids' college, your vacation down south…
Are you afraid of electric cars because you think they are too expensive? Think again.
“It turns out that several electric models are sold for the same price or even cheaper than gasoline vehicles when you take subsidies into account,” notes George Iny of the APA.
The big advantage of electric cars: a full tank of energy costs on average around $7 per week… And you will never run out of fuel because their autonomy covers your daily needs. Of course it is easier if you have a private parking lot with a terminal.