I know all the arguments for buying a used car. Most personal finance writers will tell you that buying a two year old car with low mileage is the best way to go. I agree with them but those two year old, low mileage, accident free vehicles are hard to find at a good price. I’m not encouraging you to go out and buy new. However, if you’re already leaning towards purchasing new, here are some ways you may be able to save money.

1. Drive standard

I simply don’t understand the arguments for paying extra for automatic. Standard is easy to learn, gives you more control of the car and is simply more fun. Ok, I take that back. There are some legitimate reasons for driving automatic including any issues with your right arm that makes it impossible to drive standard. Not knowing how isn’t a reason. There was a time I didn’t know how either. It took me a couple of hours to get the hang of it but once I did, there was no looking back. Automatic transmission on most new cars is $1000 + tax extra. Driving standard comes with significant savings.

2. Think small

If you have two kids or less and no pets, you may not need a van or an SUV, even if your kids play hockey. When we began looking for cars, we did the duffel bag test. We filled 4 duffel bags / hockey bags with down comforters and pillows and tested each trunk. If they fit in the trunk, the trunk was big enough. I was surprised at the number of small cars that have a good amount of trunk space. We also drove each one home on the test drive to make sure it would fit in our single car garage.

3. Mind the upgrades

You know the deal on this one. Think through the upgrades that are important to you before you step through the doors of a dealership. It’s the salesperson’s job to up sell. It’s up to you to decide exactly what you want.

4. Use Car Cost Canada

For $39.95 you get 5 reports which detail the wholesale price any new car. Knowledge is power when it comes to car buying. It still drives me absolutely crazy that car prices are negotiable. I can’t stand the fact that someone else with better negotiating skills paid less than I did. Knowing the wholesale price gives you powerful negotiating tools.

5. Find a family connection

In our case my husband’s brother’s wife works in upper management for a car company. She was able to arrange a huge discount for us through her benefits. She is allowed one PIN number a year for a family member. She had it faxed straight to the dealership and we were able to get car at significantly below dealer costs. If you are related to someone in the business, don’t be afraid to ask. It didn’t cost her anything and it saved us thousands.

6. Think long term

I’m all about the math. I can separate myself from the enticing smell of a new car and the way the car feels. I want to know how long it will last and what the average cost per year will be. I set up a handy Google spreadsheet and began calculating what our average cost was for our previous car; a two year old car with 45,000 km when we bought it. In the end we knew if we drove this one for a minimum of 8 years and paid cash for it, we’d be ahead.

If we want to have this car 8 to 10 years from now, it has to suit our future needs. We have two kids and no plans for more. In 8 years they’ll be 17 & 19. This may be the car they learn to drive. One of our requirements was a good amount of leg room in the back so that as they grew, the car would still fit our needs.

7. Ask for ‘bottom line’ numbers

Salespeople don’t seem to like this one. They want me to fall in love with the car so that as the numbers add up and extra costs are added on, I’m already sold. I just want the bottom line figure after all taxes, freight, mandatory extras and miscellaneous environmental taxes and sales taxes are included. We had narrowed the decision down to three cars and were basing our final decision on the bottom line price. Every dealer was reluctant to provide this information but each did when we simply explained why we wanted the numbers.

8. Pay cash

Drive your cars well past the time you pay them off. Continue paying yourself the car payment. By the time you need to replace the car, you’ll have enough saved up to pay cash. A car is not an investment. Paying cash for a depreciating asset will save you a pile of money over the long term.

9. Know what your trade-in is worth

You should know the blue book (or black book) value of your car before you go. Don’t mention your trade-in until all other negotiations are finished. Use the bottom line figure including the offered trade-in value when making your choice. Again, dealers were hesitant to do this but in all three places they quoted us what they would give us for a trade-in. If it’s no where near the blue book value, you may way to consider selling your trade in privately. The advantage to a trade-in if you can get a reasonable offer is that you’ll save that much in taxes off the final price of the car.

10. Call your insurance company before you make the choice

Again, I was surprised at the difference in quotes. I explained that we were looking at buying a car and wanted to know what the rates would be for each of our three choices. The differences were substantial and played a large part in the final decision.

I’m not encouraging you to go out and buy a new car. I also recognize not everyone can drive standard or has a family member in the industry. For those of you who are looking to buy a new car, the best thing you can do is to take the emotion out of it, do the math, look at the numbers and think practically. Your car doesn’t define who you are. Its role is to take you as safety as possible from point a to point b. If you look good getting there, all the better but looking good may not be worth the financial sacrifice.

Editor’s Note:  Here are more helpful articles on how to negotiate your next new car purchase and how to save money on auto insurance.

Kathryn has been a staff writer for MDJ since January 2009. During the day she works in an office. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Kathryn, along with her husband and two children live in Ontario.


  1. andrewbpaterson on February 22, 2010 at 10:40 am

    “the best thing you can do is to take the emotion out of it, do the math, look at the numbers and think practically”

    I LOVE IT!!!

  2. Oliver Dueck on February 22, 2010 at 10:57 am

    If you have issues with your right arm that prevent you from driving a standard you probably shouldn’t be driving at all. The more common problem for some people is there knees, since clutches take a lot more effort than the gas and brake pedals.

    But I agree, a manual transmission is the way to go.

  3. DavidV on February 22, 2010 at 11:18 am

    Car Cost Canada saved my Mom a lot of money.

  4. 2 Cents @ Balance Junkie on February 22, 2010 at 11:21 am

    This is a terrific set of suggestions for anyone in the market for a new vehicle. We bought slightly used cars a few times, but the two we currently own were bought new. At the time, we couldn’t find what we were looking for at a good price.

    Although we were aware of the depreciation factor for buying new, we didn’t want to inherit any problems and my husband is absolutely meticulous about maintenance, so we knew these vehicles would last a long time. We hope to keep them at least 8 years and then downsize once the kids leave home.

    One vehicle has a standard transmission, but that wasn’t an option for the minivan. I might just mention that, although I love to drive standard, it’s not everyone’s cup of tea and that can make these cars harder to resell. But if you’re going to drive it into the ground, I guess that’s not an issue. Great post!

  5. Mike on February 22, 2010 at 11:53 am

    I doubt I will ever buy a used car again – like you say the whole “buy a 2 year old car at a huge discount” is absolute nonsense.

    Plus it takes a lot more time to buy a used car than to buy a new car and I don’t have that time anymore.


  6. FrugalTrader on February 22, 2010 at 11:57 am

    With regards to the debate about buying new or buying used.. there isn’t a big difference if you buy new and hold for the long term (10 years). As we drive our cars for as long as possible, we’re more inclined to find a deal on a new car.

  7. Shawn S. on February 22, 2010 at 12:12 pm

    If you live in Toronto, Vancouver, Victoria, Montreal or Ottawa, I will recommend the New Vehicle Buying Service from the Automobile Protection Association (APA). From their website, the APA is “a membership based non-profit association dedicated to promoting consumer interests in the marketplace”. http://www.apa.ca/template.asp?DocID=117

    It costs about $70 for a one-year membership which entitles you to five quotes with a fixed discounted price for purchase. Even if you don’t buy through this service, it’s good to have that knowledge when you go in for negotiations at a dealer. Three years ago (before the economic decline) I couldn’t easily get a dealer to come close to the fixed quote, so I bought through the car-buying service. Hassle-free and avoided much of the dealership nonsense.

  8. Steve on February 22, 2010 at 12:33 pm

    I tend to buy 4-5 year old cars that are just out of, or about to go out of, warranty.

    The drop in value of the average car that has 1 year /20K left of warranty, versus warranty expired is significant. In fact, it’s so significant it is roughly equal to the cost of replacing the entire drivetrain with a rebuild.

    Let’s say your looking at a four y ear old, nicely equipped vehicle at 70K to 80K mileage. It might cost $25,000. Look for the same vehicle, 1 year older, but out of warranty around the 100K mark. You’ll be able to find it for around $20K.

    Let’s say you are unlucky 1 year later both your engine and transmission die. That $5K you saved will more then cover rebuilding both engine and tranny, and now you have an almost new drivetrain for the same cost as buying the vehicle that had warranty.

    Even though lots of little things will need repairs, assuming only your engine blows up, you’ve got thousands left for things like batteries, alternators, etc.

  9. soultrance on February 22, 2010 at 12:54 pm

    FYI, your Car Cost Canada redirect is 404.

  10. craig on February 22, 2010 at 12:55 pm

    Try to limit the wear and tear on the car if possible. Also make sure the correct gas is in. Don’t worry about the stupid extras. Some things may be worth it to you, but a lot can easily be done without and could end up costing thousands more for very little.

  11. Highlander on February 22, 2010 at 1:45 pm

    I usually buy new, primarily because my vehicle is the one we need to count on for long drives and out-of-the-city night-time drives. We were losing faith in my last one after a few “incidents”. It had reached over 200,000 km.

    7 – I always bottom line it as well. I tell them what I want on the vehicle, and give me the bottom-line out-the-door best-price. It only takes them a couple of minutes to figure it out, and if there is any hesitation in doing that, then they aren’t the right person for me to deal with. I always make sure I have at least one competitor model I am considering as well, and tell them that up front.
    8 – If you can get one of the 0% loans, it doesnt make sense to pay cash. I bought a end of model line 2009 model last october and 0% was one of the incentives. My funds are happily working away elsewhere for me right now.
    9 – Selling privately is *much* easier than I anticipated. The last vehicle I traded in had 200,000+ km, and with that mileage, dealerships will give you precious little for it. I ended up selling it privately through kijiji, and got 4 times as much for it without much trouble. In the future, I imagine I will always sell privately now.

  12. nobleea on February 22, 2010 at 1:51 pm

    Most leases depreciated the car 50% over 4 years. This means you should be able to buy a car from someone wanting to get out of their lease at this price after 4 years. For vehicle models where leasing is more prevalent, this is definitely the case.

    I don’t think i would ever buy a new vehicle again. Recently, I bought a nine year old honda accord, rebuilt from salvage write off. It was only 6K and had low miles (109K). The damage was only cosmetic (bumper and hood) but you’d be surprised what the insurance company will write off in that age/price range. There’s always a few small dealerships in every city that specialize in this. Haven’t had a problem (owned it for 9 months) and it still gets 41mpg on the highway – about 1200km per tank.

    Friends of ours bought brand new hyundai SUVs. They used car cost canada and paid I think 750 over the wholesale invoice. The dealership was quite happy with that, plus they got the 0% financing (or was it 0.9%). For most car brands, $500 over dealer invoice and they are content.

    Agree on standard transmission. Both our cars are standard, and it will be a long time before we give that up.

  13. Ms Save Money on February 22, 2010 at 2:40 pm

    When you’re buying a car – you’re not really saving any money. Saving money on a new car means not buying a new car at all.

    But to spend less than the retail price of a new car is what you want. I think this title should be “10 Ways to Spend as Little as Possible on a New Car.”

  14. Sweetvibes on February 22, 2010 at 3:39 pm

    I disagree with saving money on a manual transmission. A car with manual transmission will be less efficient with gas consumption than an automatic car, so in the long run you may end up paying more due to this fact alone.

  15. Brendan on February 22, 2010 at 3:40 pm

    Car cost Canada is excellent. I use the 100 dollar service and let them punch it out with the dealer. I show up with a check. They ask if I want to trade as well.
    Dealers ALWAYS give you black book, no more.
    I do not like standard. One week of driving in shitty Winnipeg will convert the most die hard manual fan.If you cant afford another grand, take a bus. Gas savings are almost non existant in a standard. I do agree manual is a better driving experience, except in Winnipeg where we have bad traffic movement.
    Familly connection is useless to most people, and in Manitoba any new vehicle will cost you 1200 per year to insure.
    There is no such thing as a 2 year old well maintained car for a decent price.
    If you find one, ask the seller if the unicorn is for sale too.
    Personally I always buy new, and what i actually need, and afford. I drive it for a minimum of 10 years. After 10 years I am owed nothing from the car.

  16. chris on February 22, 2010 at 5:12 pm

    another reason to drive standard: fuel savings and brake savings. control your gears, use less gas. also coasting to a stop in gear uses zero gas and saves on your brakes. i went 140,000km without a brake change on my toyota, and when i did the brakes, they werent even at the wear indicators yet.

  17. Sarlock on February 22, 2010 at 5:14 pm

    Dealers usually get a better kickback if they sell the car on financing. You’ll often find you’ll get a lower price on the car than if you paid cash for it… and then just write a cheque to pay off the loan the next day (just make sure there are no penalties for early payment) and you’ll have effectively paid cash for it but paid less overall.
    Those 0% financing deals aren’t all they are cracked up to be… you’re paying for it one way or another. Purchase a vehicle with no special financing options and you’ll be able to negotiate a cheaper price. Ask your dealer what financing method would produce the greatest return for them and you’ll be talking their language. Make it a win-win situation.

  18. Sarlock on February 22, 2010 at 5:16 pm

    And I agree with Chris: Huge savings on the breaks if you downshift to slow yourself down. We brought our Honda Accord with 110,000 km in to the garage a few months ago to have the breaks looked at and there was still tons of life left on the original pads. I also downshift a lot on my automatic, it all adds up.

  19. Kathryn on February 22, 2010 at 5:36 pm

    The other great resource I found since writing this is Phil Edmonston’s Lemon-Aid guides. For less than $20 on amazon.ca, it has a ton of information about different cars. There is a ‘used car’ version and an ‘new car’ version for each year.

  20. Potato on February 22, 2010 at 7:23 pm

    If you do a lot of city driving, a hybrid powertrain will do you even better than a manual – save on brakes, save on your left knee, save on gas. They’re a no brainer in most provinces with rebates.

    I borrowed the Lemon-Aid guide from the library before getting my car, and found it was appallingly inaccurate. I suppose if he’s going to write a book about every car he’s not going to put the kind of research into any single model that I did, but still… Maybe it’s better for the American manufacturers.

  21. Bilbo Bloggins on February 22, 2010 at 9:06 pm

    I’ll give you one way to save 20% on a car over $30,000.
    Buy in from the States!

  22. Future Money-Bags on February 22, 2010 at 10:36 pm

    All good points, nice input. Buying good quality cars at the cheapest price, is something everyone should be good at.
    Buying from the states can be a good idea, but it has to be a fairly expensive and worthwhile purchase to be worth it. Or you lose money bringing it over the border.

  23. J J on February 22, 2010 at 11:13 pm

    I’ll tell you why you should always buy automatic. RESALE VALUE! Less than 50% of the population can drive standard (competently). And I bet less than 10-15% would actually want to drive a car with a standard transmission on a daily basis.

    When I went shopping for a used car, there were a lot of 5 speeds on the lot. The reason is they can’t sell them. There’s no buyers. That’s all there is to it.

    As a follow up to resale value though, as a buyer you can really negotiate on a used car with a standard transmission.

    So I will restate my response:
    1. When buying new, always buy automatic.
    2. When buying used, prefer an automatic, but if you can bargain down on a 5 speed, go for it.

  24. Kathryn on February 22, 2010 at 11:36 pm

    Resale value is a moot point if the idea is to buy new and drive it for 10+ years.

    According to consumer reports, manual transmissions are not only less up front, but they cost lest to repair and have better fuel economy.


    I’m curious where you got your stat about 50% of the population not being able to drive standard. I tried to find stats on that and couldn’t find any.

  25. Ken Siew on February 23, 2010 at 2:57 am

    Hey guys, this is my first comment on this blog, but it definitely won’t be the last!

    I agree with most of your points Kathryn, and to clarify on Point #10, it’s important to call your existing insurance company (such as the one you have on your house or other stuffs), because they will give you a better quote for the combo.

    As for Point #8, I have to differ. If the amount of cash is significant, it’s better to put the money away at an S&P 500 index fund and earn the average returns over the long run (about 8% in general), rather than paying off the car payment interests (around 3%).

    As for minding upgrades that’s a good point. Car dealers are great at negotiation. They often make you commit to buying the car, and THEN tell you to add additional accessories to it. When you compare the cost of a $500 stereo to a 20 grand new car, you probably will just snap it up.

    Also, if you’re really not good at negotiating, you should hire someone to negotiate for you. Search for car negotiation service on Google, they usually will split the savings with you, giving them more incentives to get a lower price. If you don’t trust negotiators, get the quotes of all the local dealers by fax, and then fax the lowest quote to all of them and let them fight for deal. You only need to pick up the car =)

    Thanks Kathryn!

  26. Future Money-Bags on February 23, 2010 at 8:25 am

    I disagree that only ’10-15%’ of people want to drive standard.
    I just started this year and after 1 month I have mastered it and am just as good as I was before on an automatic. Its more fun, its easier on breaks, and the cars tend to last longer. (I have an 88′ accord and it runs great!)
    I practically got it for free and its needed no repairs.

    Everyone I know that has standard, loves it for first month, than hates it for 2nd, than loves it for life after. haha

  27. Financial Cents on February 23, 2010 at 11:31 am

    Good post, although I disagree with a few things.

    1) I would never pay cash for a car given the time-value-money equation. Interest rates are far too low to pay cash for your car. Sure, put a large downpayment on the vehicle, but why avoid 0%, 0.9% or even 1.9% financing? That’s considered “good debt” in my opinion and small debt financing payments are better served on a new car since the day your drive that vehicle off the lot, it depreciates nearly 10%. Anything else, that costly, you can think of that depreciates 10% the day you buy it?

    2) Automatic transmission is to good have, depending where you live and drive (we have automatic and standard in our yard). Yes, you may be able to save some money buying manual; but to your point # 3, the best way to save money on a new car is to take emotion out of your purchase and buy what you need versus everything you want. Mind all the upgrades and avoid all the upselling. Make your car purchase based on your needs and not on all your wants; the extra bells and whistles will cost you up front and in the long run, when you wear out the ringer(s).

  28. J J on February 23, 2010 at 1:27 pm

    @Kathryn I don’t think resale value is a moot point at all. Try selling a car with a manual tramission. Unless it’s a sports car, it’s difficult. As for repair costs, you may be right, but clutches aren’t cheap to replace either. Any tranmission work is costly.

    @Future Money-Bags I said 50% could drive standard, but only 10-15% would actually go down to the dealership lot and be geniunely interested in purchasing a car with a manual tranmission. Most people just don’t want to be bothered. Think about the family person, or the retired person, or people who just can’t be bothered with changing gears.

    The fact is you can think you will save money by buying a manual transmission. But you don’t know where you’ll be in 5 years, and you may need to sell for any number of reasons, and an automatic has much greater demand in the market than manual tranmissions. Just ask the sales people. I bet a lot of salespeople would rather not have anything to with manual tranmissions.

  29. Brendan on February 23, 2010 at 2:45 pm

    JJ, you hit the nail on the head. I dont need stats to tell me it is harder to sell a manual tranny vehicle. I sold a manual years ago, and many people passed it on because it was manual.
    Sports car, yes a manual is almost required.

    *by tranny I mean manual transmission, and not transvestite. No intent was mean to reference one’s sexual choices/preferences.

  30. ethan on February 23, 2010 at 4:05 pm

    actually automatic transmission is more expensive to replace or service vs manual transmission.

  31. Craig on February 26, 2010 at 11:37 pm

    I disagree that buying a standard is a good way to save. You may save upfront, but you really limit your buyers when you go to resell…unless its a Ferrari!

  32. Jan on February 28, 2010 at 2:36 am

    Be prepared for the dealership to call you “cheap”. We went in with the lowest quote from a dealership 200 miles away and sat until they gave us the deal. This time standard was actually more expensive – since there were none on the lot.
    The price we got was about $3000. under sticker. Considering the car was only $17,000 to start- I’d say we did ok.
    By the way- cash is the ONLY way to go. Even “good debt” is debt. Save the money before and forget the debt!
    But the chorus of “cheap, cheap, cheap” was a bit annoying as we left the show room.

  33. tripleBottomLine on March 21, 2010 at 11:28 pm

    If you are a new graduate, many companies have discounts available directly from the manufactures. Do your research, and don’t mention you are a new graduate until after you’ve got the final price, as it is usually something you apply directly to the manufacturers for. It is available for used cars from the dealers too. I received $500 from Toyota when buying a used car a couple years ago, new car discounts ranged from $1000 – $2000. Most consider you a new grad if you graduated from a post secondary institution within the last two years.

  34. Doctor Stock on March 22, 2010 at 12:09 am

    Really appreciate the link to the car cost guide… didn’t know that existed. Every car purchaser should take a peak I’d think!

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