Buying a New vs Used Car: A Detailed Comparison

Studies show that car manufacturers continue to improve the fuel efficiency and CO2 emissions of their new releases. Since 2004, technological advancements and market trends have led to a roughly 30–40% increase in average fuel economy for new vehicles. The following innovations help users save on fuel:

• Direct fuel injection
• Stop/start systems that turn engines off instead of allowing them to idle
• Automatic transmissions with a bigger range of gear ratios

Safety is one of the top considerations on car buyers’ minds. Thanks to new tech and government mandates on passenger safety, new cars are proving to be safer and more reliable than older models.

Aside from mirrors and seat belts, which have been the de facto auto safety features for decades, these are some of the most recently mandated safety features for new vehicles in Canada:

• Anti-Lock Brakes (ABS): This prevents wheels from locking up under harsh braking, keeping the vehicle from skidding during sharp braking. Anti-lock braking systems (ABS) became standard safety equipment in most passenger vehicles in the early 2000s as safety regulations evolved.
• Child seat tethers: In the early 2000s, Canada introduced the Lower Universal Anchorage System (LUAS) to standardize anchor points for child seats in passenger vehicles. These are attachment points that connect to child seat tethers.
• Electronic Stability Control (ECS): This is another feature that prevents vehicles from skidding. ESC will automatically apply the brakes when it senses that the vehicle is veering off course. Electronic stability control became mandatory for most new passenger vehicles in the early 2010s.
• Rearview camera: Rearview cameras have been mandatory for most new passenger vehicles sold in Canada since May 2018.

All new cars come with a manufacturer’s warranty, which protects car owners from paying for any mechanical defects within a certain period. Manufacturers’ warranties typically last three years or 60,000 kilometres, though coverage varies by manufacturer.

The cost of warranties for new cars is already factored into the vehicle’s sticker price. Used car buyers can purchase extended warranties from the vehicle manufacturer, dealership, or a third-party company, but these come at an additional cost.

Even though EVs come at a higher upfront cost versus fuel- and diesel-powered vehicles, Transport Canada’s Incentives for Zero-Emission Vehicles (iZEV) makes purchasing new EVs more affordable.
Under this program, buyers can benefit from two levels of incentives:

• Battery-electric, hydrogen fuel cell, and longer-range plug-in hybrid vehicles: Up to $5,000
• Shorter-range plug-in hybrid electric vehicles: Up to $2,500

Several provinces have also implemented special programs for low-carbon-emitting vehicles, such as Ontario’s Green Licence Plate Program, which provides certain zero-emission vehicles access to HOV lanes regardless of passenger

Depreciation is the rate at which a vehicle’s value declines over time. It’s also a new car buyer’s worst enemy. New cars depreciate the moment they’re driven off the lot and lose a significant amount of their initial value within the first year.

In fact, new cars can lose up to 20 percent in value in just one year and nearly half in the fourth year. All this is to say that, thanks to depreciation, used cars tend to be far cheaper than brand-new cars – even if they’re just a few years old.

Teething problems are issues related to a newly introduced or launched product. When you buy a new edition or a new model, you’re likely to experience such issues or even have to deal with recalls.
The facet that is most often hit with teething problems? Advanced in-car technologies like voice control, smartphone integration, navigation, and other driver-assist and safety features.

As mentioned, new cars depreciate quickly within the first four years. This means that you can save a significant amount of money by buying a slightly older version of the model you’re after. You may even be able to afford a car that is typically beyond your usual budget range – as long as you buy an older model.

There are a ton of hidden extra costs that come with buying a new car, including:

• Registration fees
• Car sales tax
• Dealer fees
• Freight fees
• Insurance premiums

When you buy a used car, you may be able to save on some of these costs:

• The amount of sales tax you have to pay for purchasing a used vehicle varies from province to province, but in some provinces, you end up paying less in sales taxes when you buy a used car through a private seller. If you live in Alberta, you will only be subject to paying a 5% GST tax, while you’ll have to pay 13% HST in Ontario.
• You get to skip the freight fee (the cost of delivering the vehicle from the factory to the dealership) when you buy used.
• Buying a used car may also allow you to pay less on registration fees, which are determined by the price of the vehicle upon purchase.

Auto insurance is mandatory for all car owners in Canada. Despite this, many buyers tend to overlook this factor when considering what kind of car to buy.

Sure, new cars may come with more advanced safety features that do a better job of keeping you safe, but new technology comes at a hefty price, too. Used cars are cheaper to insure than new cars, and it’s usually because the former cost less to replace and repair. If you’re not willing to spend too much on insurance, used is the way to go.

Bear in mind that insurers also take a vehicle’s make and model into consideration when calculating premiums. Best-selling vehicles may be cheaper to repair, given that their parts are more readily available, but they’re also among the most theft-prone cars. Their ubiquity makes them easy targets because their parts are always in demand and they can fly under the radar for far longer.

All new cars come with a manufacturer’s warranty that promises new owners free-of-cost replacement or repairs for a range of issues occurring within at least three years. This is just something you don’t get when you buy used. You can, of course, get an extended warranty if you’re buying a used car through a reputable dealership, but these come at an extra cost.

Government incentives are also few and far between for used car buyers. Some dealerships may announce special deals and promos from time to time, but these usually only include either newer models or very old ones that aren’t selling well.

To quell some of the uncertainty that comes with buying a used car, do your research and learn more about the vehicle’s history. In some places, dealers are required to do some of the work for you. This is the case in Ontario, where auto dealers must provide a Used Vehicle Information Package or UVIP for every car they sell.

This package must contain:

• The vehicle details (including the year, make, model, colour, body type, cylinders and power)
• The vehicle registration history in Ontario
• Any existing liens on the vehicle
• The average wholesale value of the vehicle
• Whether the car is physically unfit or has not been granted a Safety Standards Certificate
• If the vehicle has been completely dismantled or crushed

You can also request a vehicle history report from a third-party provider, but this comes at an additional cost. These reports are a bit more extensive and provide additional information on things like accident history, instances of theft, and safety recalls.

Owning a car can be expensive. Beyond the initial costs – which include the down payment, dealership fees, sales tax, and registration fees – you also have recurring costs, which include your monthly loan payments, insurance premiums, maintenance fees, and the cost of repairs.

And when it comes to used cars, which have put in more miles than a brand new car, there is a higher chance that you will need to spend more on repairs.