Buying a Used Car in Canada

Recently, a friend asked me how to buy a used car. While there is a lot of advice on the subject, what follows is a technique that I have used successfully. This approach has two main objectives:

1. To not be 'taken' - to avoid grossly overpaying for a car, typically a car that is worth far less than what it appears; and
2. To obtain the best possible price.

These two objectives are not necessarily the same. Many of the steps below are suggested to accurately value the car and avoid deception, however, they do not necessarily guarantee paying bottom dollar. As I teach my negotiation students, there are many factors, chief among them the skill of the negotiator, that determine the overall outcome of the negotiation. One of the single biggest factors, for example, is how much time there is to negotiate. With that said, many people fear being taken advantage of rather than obtaining the best possible price. These tips will go a long way to assure you that the car you are buying is worth what you're paying for it, or at least as good as you could have gotten elsewhere.

Step 1. Identify goals 

• What type of vehicle are you looking for? (car, crossover, truck - new vs used)
• What features do you need / want? (AC, power windows, backup camera etc.)
• How long do you expect to keep the car for? (How many years / seasons?)
• What is your overall price range? What about financing? (Factor in all expenses, e.g. insurance, winter tires, etc.)

Step 2. Identify a high-quality car that meets your needs (goals)

• For Canada, I recommend a book called Lemon-Aid (a "lemon" is slang for a car that has significant defects). There is one book for used and one for new vehicles, broken up by type of vehicle (car, truck). This book also contains tips on how to negotiate the purchase of a car.
• Your local library should have a copy of the most recent version of this book in the reference section, which is updated every year.
• If you have a type of vehicle in mind, see what vehicles are given a five-star rating (based on the model and year of manufacture and a number of factors, including maintenance).
• From this search, you will hopefully have two or three vehicles in mind that fit your goals and have a high-quality rating: make, model, and year. For example, 2015 Hyundai Santa Fe or 2017 GMC Acadia.

Step 3. Find local used car dealers that have those vehicles

• AutoTrader.ca is one way.
• Why a used car dealer? You may end up paying more, but there is a place that you can go to if you're not satisfied once the deal is done. That is, they may be able to help you out if something breaks soon after you buy, or if something isn't up to the standard agreed upon.
• The key here is to find several cars that you love, not just one. If there's only one, you're in trouble. You want to develop your Best Alternative to a Negotiated Agreement ('BATNA'). This will take time and several visits to different dealers.

Step 4. Assess the specific vehicles

• Record the Vehicle Identification Number (VIN), year, and odometer reading.
• Find out if there is any warranty left on the vehicle.
• Ask about
• The history of the vehicle, specifically if it's been in any accidents or had any insurance claims made about it. CarProof or another similar service can help here;
• DriveClean emissions testing and how the engine performs generally; and
• If any manufacturer's safety bulletins have been complied with.
• Inspect the vehicle and note any defects.
• Test drive the vehicle - both highway and city driving, if possible.
• Have a mechanic you trust inspect the car.
• You will have to pay for this, but it goes a long way to 1) avoiding overpaying for the car worth considerably less and 2) negotiating a lower price as your mechanic will likely identify problems not previously noted.

Step 5. Determine the on-the-road price of the vehicles you're most interested in

• Is the car roadworthy as it is? If not, how much will cost to get it on the road?
• Consider fuel consumption.
• Winter tires + other accessories?
• How much will it cost to have the drivers on the insurance?
• Call the insurance company you expect to use and provide all of the car and driver details, they can give you a quote. While somewhat onerus, this is a very important step to truly determine the true cost of the vehicle.
• This cost varies widely by make, model, and year of vehicle, sometimes by several fold (e.g. 2013 GMC can cost 3x as much to insurance as 2011 Hyundai).

Step 6. Negotiate with several dealers at once

• While you may have a vehicle your prefer over all others, develop your BATNA by seeing how low you can negotiate your next preferred two or three vehicles.
• Understand that negotiation is an iterative process. There is a 'dance' to negotiation. Some general advice follows:
• Have the dealer make the first offer - usually this is the posted price, but you can also ask about any special promotions etc.
• Using an objective standard, such as the book value of the vehicle (there are several: Canada Blue Book, CarProof, Lemon-Aid), suggest a price in line or even below that (if you can justify the reason why it's lower (such as high mileage).
• Go back and forth, getting a counter-offer from the dealer and making concessions yourself from your last offer.
• Don't negotiate against yourself - once you've made an offer, get a counter offer before making another offer.
• To obtain concessions from the dealer, mention issues that are making it difficult for you to accept their offer, such as:
• High mileage;
• Poor fuel consumption;
• High cost of insurance (having actual quotes from insurers can be quite persuasive as it is strong evidence but also an indication you're serious about buying);
• Minor or major damage to the car; and
• Any costs necessary to make the car roadworthy (DriveClean, etc).
• Don't be afraid to walk away - visit several times. Feel free to mention up front that you're interested in other vehicles at other places.
• Towards the end, ask the dealer why you shouldn't just go with your BATNA (the other car).
• Consider add-ins, as well as decreases price.
• Often the dealer will reach a point where they're unable to go lower, but can still add in other features at little to no increase in price: remote starters, winter tires, extra key fobs, minor repairs, etc.

This is simply one approach, it is by no means that only way of negotiating the purchase of a used car. Those that are comfortable with other methods, particularly if they are able to obtain better results, should continue to use those methods, however, I hope this post provides a starting point for people that have never negotiated such a purchase.

Resources:

• Buying or Selling a Used Car in Ontario (MTO)
• Safety Standards Certificate (MTO)
• Ontario's DriveClean Program
• Getting to Yes: How To Negotiate Agreement Without Giving In (2nd ed) by Roger Fisher, William Ury, and Bruce Patton
• Negotiation Genius by Deepak Malhotra & Max Bazerman