It’s not as easy for young buyers to get a vehicle as the affordable “starter car” has disappeared, auto experts say.
“There’s no such thing as a starter brand new car anymore,” said Michael Bettencourt, a longtime auto journalist and co-author of an upcoming book on buying an electric vehicle in Canada. He is also a father to a 17- and 20-year old—the latter of whom will be shopping for a car soon.
With two sons that age, insurance is a nightmare, Bettencourt said. If you have a few models in mind, check out insurance rates for those vehicles before you start shopping.
“Find a site that will compare multiple insurance rates at once,” Bettencourt said.
“If you’re looking between two cars … you could easily be paying much higher insurance rates on one versus the other. That may be (thousands a year) that’s better spent on paying off student debt, right?”
“Just five years ago, you could buy a (new) car for less than $10,000 before fees. Now you can’t get one for less than $20,000 before fees,” said Stephanie Wallcraft, a freelance automotive journalist and co-host of Modern Motoring on YouTube.
For those who can afford it, Wallcraft prefers new or certified pre-owned vehicles. In both cases, what she values is the warranty—it’s also why she doesn’t advocate for private sales or cheap used cars.
“When you’re on a tight budget, a fixed budget, surprise repairs can really hurt you,” Wallcraft said, nothing that younger people are less likely to have an emergency fund for such expenses. Putting costly repairs on a credit card can quickly accumulate high interest.
“When you buy new or certified pre-owned, you’re going to have a warranty period where if anything serious comes up, that’s going to be covered.”
Bettencourt favours off-lease vehicles that are a couple years old. When people lease new cars, they will be financially dinged if they damage or fail to maintain the car, so he thinks maintenance and handling is better. These cars won’t be the cheapest on the lot, he noted.
“But I do think that’s a quality pool of used vehicles,” Bettencourt said. He would only buy privately if inspection by a mechanic was part of the sale contract.
As for electric vehicles, the federal rebate was just halted in January, but there are provincial subsidies remaining in British Columbia, Newfoundland and Labrador, Nova Scotia, Yukon, New Brunswick, Prince Edward Island and Manitoba, Bettencourt pointed out. Pre-owned is still a valuable option for this segment, he added.
“The resale values of EVs have tended to depreciate very quickly, so that provides, in a way, more of an incentive to buy an off-lease or a slightly used EV because of that high depreciation,” Bettencourt said.
As for the shopping experience, Wallcraft said a salesperson at a dealership will likely ask what monthly payment you can afford—but she calls this question a trap.
“What the salesperson is doing when they ask you that question is they’re going to try to find the most expensive car that they can talk you into,” Wallcraft said, “and give you a really long financing term so that monthly payment is low enough that you can afford it.”
Lately she’s been hearing of nine- and ten-year financing terms, which are relatively new but she expects will become more common—especially with a lack of affordable starter cars on the market for young people to buy.
The problem with a long financing term on an asset that depreciates quickly is that serious problems could arise or your needs could change before you fully own the vehicle, Wallcraft said. If your car suffers a catastrophic failure, your lifestyle changes, you move, you partner up, or you have kids, you’re still making payments on a car that’s not working for you.
If you still owe money on the car when it needs to be replaced, “that’s how you get into the trap,” Wallcraft said. “Because then you’ll go into the dealership and they’ll say, ‘We can roll what you still owe on your financing into your next car.’ Well, now you owe that much more on your next car, and it takes you that much longer to get back up above water.”
It’s better to pay off the car quickly, she said. You’ll own it outright faster, at which point you’ll not only have no car payments, but you can easily sell it or replace it as you see fit.
At the dealership, car buyers should specify their desired financing term, not the monthly payment, Wallcraft explained. If you can afford it, get the financing term to match the warranty term. Or at least get as close as possible, she added: If the warranty is four years, try for five- or six-year financing—not eight or nine years.
It’s a good idea to bring someone with you when car shopping, Bettencourt said, especially if you have a partner, as it’s likely they will drive the car too. Go for a long test drive and connect to the Bluetooth.
“However you think you’d use it, it’s worth spending a few minutes to attach your phone to the Bluetooth,” Bettencourt said. “Why attach it to Bluetooth for a 10-minute drive? Well if that car has issues … it makes any car more of a headache to drive.”
As for add-ons, Wallcraft said she would turn down rust protection and look at an extended warranty “very carefully” to see if it’s worth it. Bettencourt agreed on the extended warranty—it may cost thousands of dollars and if you can save that money yourself in an emergency fund, you at least might have some leftover at the end of the car’s life, whereas a warranty goes nowhere if unused.
Never be afraid to walk away and try another dealership, Wallcraft added. She’s also heard of sales tactics where dealerships are telling buyers they cannot sell a car without certain add-ons.
“They’re not allowed to do that,” Wallcraft said.
“I don’t think it’s technically illegal right now but there’s actually a movement of people trying to make it outright illegal. If a dealership is trying to tell you, ‘We can’t sell you the car unless you take this rust protection,’ try a different dealership. That’s the point at which I would not hesitate to walk away.”
