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What you need to know before buying a car and auto insurance

Buying a car can be one of the most exciting purchases newcomers will make. No matter what stage of life, a new car sparks a flurry of emotions.

But before you head to the showroom or online to find the new or used vehicle you want, ask yourself a few important questions.

First, and most importantly: How much can you afford to spend?

“Examine your finances before you become entranced by a shiny new vehicle,” says Lucie Tedesco, Commissioner of the Financial Consumer Agency of Canada.

“Create a budget showing not only what you can afford to pay per month on a car loan, but also what you will end up paying in total for the vehicle. Don’t just take into account the sticker price: include sales tax and anticipated maintenance and repairs, insurance, fuel costs and parking fees, if any.”

The amount of your regular payments will be influenced by:
• The total price of the car.
• The term of your loan.
• The interest rate on your loan.
• The amount of your down payment, if any.

You should also order and review your credit report before starting to shop for a car. Any mistakes in that report could mean the lender turns you down or increases the interest rate on the loan.

After you’ve given your calculator a workout, you might discover that making the regular payments on the car you want may be more difficult than you expected, or the long-term cost of the loan might be too high.

At that point, you should consider changing your plans and buying a car you can reasonably afford.

Use FCAC’s budget calculator to help plan your purchase. Visit www.ItPaysToKnow.gc.ca for more information.

• • •

You’re ready to drive on the open road. You’ve got your licence, your car, and a full tank of gas.

The only thing that’s missing is the right auto insurance policy.

“When you’re buying auto insurance, it is important to consider the level of coverage and deductible suitable for you,” says Sylvain Renaud, Vice-President, Personal Lines at Intact Insurance.

Auto insurance provides you with the comfort of knowing that in the event of an accident, you’re protected. It’s mandatory and covers drivers, occupants and pedestrians in the event of a collision.

Here, Renaud answers five questions that will set you up for success before buying insurance:

1. What are the different components of an auto insurance policy?
There are four components to provide you coverage:
Collision – covers damage to your vehicle in an accident when you hit something or someone hits you.
Comprehensive – covers damages to your vehicle that aren’t covered under Collision. This includes things like fire, theft, hail and vandalism.
Accident benefits – provide coverage to you and the occupants in your vehicle in an accident.
Liability – covers you for damages that you cause to other cars and objects or injuries to other people.
You can choose coverage limits and deductibles for these coverages that suit your needs and budget.

2. How do I get insurance?
You can go through an insurance broker who carries insurance packages from a variety of companies or through an agent from a specific insurance provider.

3. Why are insurance costs different for everyone?
The cost has to do with a variety of factors: your driving habits and skills, where you live, how often you drive, etc. In order to calculate your insurance premium, companies use their own historical data and experience, along with the information you provide to determine the likelihood that you will have an accident or have a loss associated with your vehicle.

4. Am I covered when driving someone else’s car?
You’re covered under the car owner’s insurance. However, you need to have their consent and abide by the terms and conditions of the policy.

5. Explain the difference between the insurance premium and the deductible?
An insurance premium is the amount of money you pay for an insurance policy. A deductible is the amount of money you will pay before an insurance company will cover the costs.

– News Canada

Posted: Oct 4, 2016

April 2019

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