Each June, thousands of students graduate from colleges and universities across Canada. Many will soon be gainfully employed and will need a car to get to and from work. For graduates looking to buy a car, the choices seem boundless and confusing. Here are seven guidelines to simplify car-buying and to help young car buyers make an informed decision:
1. Seek good advice. Contact local car dealerships, friends, family members and banks to learn the ins and outs of car ownership. Finance rates, borrowing costs, graduate new car programs, purchasing vs. leasing, debt-to-equity ratio and trade-in values are some of the issues that car-shoppers of any age should understand before making a purchase.
2. Create a budget. Driving a fancy new sports car would be a thrill, but a second-hand sedan might make more financial sense. You’ll need to factor in monthly car payments, fuel, regular maintenance, repairs, insurance costs, parking expenses and depreciation. According to Edmunds.com, your “monthly car payments and related expenses should not exceed 20 per cent of your net income.”
3. Consider financing. Graduating students often don’t have any credit history, which could make financing a car difficult, but not impossible. You could get a parent or guardian to co-sign a loan. Most auto manufacturers offer new car incentive programs for students and graduates, which allow for discounts. These programs are quite popular and help to reduce the overall cost of vehicle ownership.
4. Compare insurance. If you are under 25, expect to pay higher rates for car insurance. That’s the truth about being a younger driver. If you have a good driving record (free of speeding and traffic violations) and have passed a course from an accredited driving school, then you are eligible for preferred rates. Items such as anti-theft devices, air bags and anti-locks brakes will result in lower premiums, and some insurance companies provide discounts for driving certain types of eco-friendly vehicles. Compare prices and talk to several insurance companies before making a decision.
5. Avoid impulse-buying. When young adults land full-time jobs, they experience joy and euphoria as money starts rolling in and bank balances grow. For some, there may be a tendency to purchase a car on impulse based solely on “keeping us with the Jones” or a persuasive advertisement. While car manufacturers and dealers invest millions in marketing and promotions each year, car buyers need to understand all aspects of vehicle ownership. The more information you gather and the better you understand the numbers, the better your chances of choosing a car that fits your needs and budget.
6. New or pre-owned? There are pros and cons associated with both, and young buyers need to understand those differences if they want to make a wise buying decision. Buying new means that you have the full benefit of the manufacturer’s warranty, along with the latest safety features, on-board technologies and infotainment extras. With used, you avoid the depreciation. Used vehicles (when purchased from a registered car dealership) will come with the balance of the manufacturer’s warranty (if applicable), car history reports and other consumer protections.
7. Decide whether to go with new or pre-owned. Whether you choose new or pre-owned, always budget for regular maintenance on your newly acquired vehicle. A properly maintained vehicle is safer and more economical to drive, and it will retain maximum value when it comes time to trade it in.
On behalf of the Trillium Automobile Dealers Association, I would like to congratulate all of the students who have graduated (or will graduate) this year. I wish you success in your future academic pursuits and professional careers.
This column represents the views of TADA. Email firstname.lastname@example.org or visit tada.ca. Benny Leung, president of the Trillium Automobile Dealers Association, is a new-car dealer in the GTA.
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