A Newcomer’s Guide to Buying a Car in Canada

A Newcomer’s Guide to Buying a Car in Canada

March 20, 2024    Financing & Leasing

Buying a car in a new country can be overwhelming – from paperwork to pre-approvals to credit checks.

We wanted to make things easy if you are a newcomer trying to navigate the Canadian car-buying market. This guide will give you information on budgeting, how to build your credit, documents to gather and more.


When deciding between buying a new or used car in Canada, there are several factors to consider. However, the savings associated with purchasing a pre-owned car can make it a viable option for many newcomer buyers. Here are some of the advantages:

  • Lower Cost. If you’re looking to save a bit of money, shopping for a pre-owned model is the best way to go.
  • Lower Payments & Less Fees. Buying used often means lower monthly payments and insurance rates as well as less upfront fees.
  • Better Resale Value. Used cars depreciate slower and can have a more stable resale value than new ones.
  • Shorter Financing Options. Buying used often means more affordable financing options including shorter loan terms.
  • Improve Your Credit. If you finance a used car and you’re able to make your payments in full (and on time), your credit score will likely improve.
  • Own The Car After. Once you’ve made all your payments, the car is yours! At that point, you can decide to sell it and buy a newer vehicle or keep driving it while it’s still in good condition.


Before purchasing a car in Canada, consider these factors that will affect your budget and the type of vehicle you can afford:

  • Income. Calculate your total income after taxes, then allocate 10% to 15% of that total. This amount is your estimated cost for a vehicle including maintenance, insurance and gas.
  • Debt. Debts like student loans or credit card balances can significantly impact your car-buying budget. Take into consideration the portion of your income already dedicated to any existing debt payments.
  • Financing. If you opt for a financing option, this loan payment amount should be considered within your monthly expenses.
  • Taxes & Fees. Remember that the purchase price of your vehcile doesn’t include potential expenses such as registration fees, etc.


Aside from budget, here are some other things to consider when choosing a vehicle in Canada:

  • Features. Look for things like technology, design, speed and other specs that suit your preferences. A big consideration when buying a car in Canada is clearance (how far from the ground the car frame sits), as this impacts how it will drive in the snow.
  • Safety. Reliability should be a top priority when buying a car. Look for features such as driver assistance technologies, rear-view cameras and blind-spot monitoring. Keep in mind vehicles manufactured in Canada must meet a production safety standards that earn National Safety Mark.
  • Fuel Efficiency. Opting for a vehicle that offers better fuel economy will ultimately save you money and provide a much better driving experience. In Canada, fuel efficiency is especially important with higher gas costs and colder weather.


While there is technically never a ‘bad’ time to buy a car in Canada, there are some specific times when you may see reductions in vehicle prices:

  • Winter Months. The colder months often have deals because customer traffic is slower.
  • End of Month. The end of the month usually sees clearance sales to make room for new feature vehicles.
  • End of Year. The end of the calendar year normally has sales to make space for new inventory.


Lenders in Canada generally do ask for credit scores when attempting pre-approval for a car loan.

Maybe since moving to Canada, you’ve been introduced to the terms “credit score” and “credit history” for the first time. That being said – if you’re new to Canada, you likely haven’t had a chance to build your credit history. Your credit history is a record of your loans/debts that showcases your ability to repay them responsibly over the years. The longer your history of good repayment, the better your credit score will be.

When you move to Canada, you can start building your credit almost instantly:

  • Apply for a credit card. One of the easiest ways to build credit is to use it! By taking out a credit card and making your payments on time, you’ll be able to build your credit in a relatively easy way.
  • Pay your credit card on time. Paying your credit card on time, every time, is an easy way to boost your credit as it shows a lender you are a reliable borrower.
  • Pay off the full balance of your credit card. If you only pay the minimum amount, your debt will be carried into the next month and you’ll end up paying more interest over time.
  • Try not to use more than 30 per cent of your available credit. If you’re unable to pay off your credit card, you’re spending more than you can afford. Keep an eye on it so you can live within your means.
  • Pay your bills on time. Paying your other bills on time will help you build good habits and prevent you from missing payments which could negatively impact your credit.
  • Take out a car loan. A great way to build your credit is to take out a vehicle loan! Having regular loan payments will give you a chance to build your credit and show lenders they can count on you.


When it comes to auto financing in Canada, there are a few terms you should be aware of:

  • Principal. The principal is the total amount of money you’ll be borrowing for the loan.
  • Interest. Interest is the cost of borrowing money. For auto loans, most interest is fixed, meaning that the rate won’t fluctuate. This makes it easy to predict future payments.
  • Term. This is the duration of the loan. Keep in mind, the term can change based on how often your plan requires you to pay and how much you’re paying. We adjust these according to the budget that suits your financial situation.
  • Down Payment. The down payment is the amount of you pay toward a loan at the beginning of the loan. It reduces your principal and interest. We recommend a down payment of 10–20% of the vehicle price.

Estimate your loans with our free Car Loan Calculator!

Did you know? Birchwood Credit offers in-house financing! This means we are able to provide loans to our customers directly. Doing this eliminates our reliance on the financial sector by providing the customer with funds to complete a transaction directly. An in-house car loan is a great alternative to financing through other financial institutions such as banks.

Lending our own money means more approvals, better repayment terms and better rates. Plus, we wil make sure you get into a car you love, regardless of your credit score.

We are one of the few car loan companies in Manitoba that offer true in-house financing without relying on outside brokers or lenders. If you decide to finance your vehicle through Birchwood Credit, you are dealing with a name you can trust.


Though there is some variation depending on where you live and the seller you are dealing with, these are the main documents you will need in order to buy a car in Canada:

  • A valid driver’s licence
  • Proof of car insurance
  • Vehicle registration*

*This is more in reference to owning rather than buying a car, as most people register their vehicle after purchase.


At Birchwood Credit, we want to help new Canadians find reliable transportation and increase their credit score. We recognize there may be obstacles that make it challenging for you to get approved for auto financing at other banks and lenders.

At Birchwood Credit, we specialize in helping car buyers with less-than-perfect credit (and even no credit history) get an auto loan with terms they can actually afford.

We’re here to help you drive away in an affordable vehicle! Get started today.

Rebecca Lake
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