Getting Your First Car in Canada

As you settle in Canada, you may find that you need a vehicle to get around. But before you start the process to buy or lease a car, you should begin by getting a provincial driver’s license — and making sure you understand the local rules of the road and how to drive in Canadian climate conditions. 

Provincial driver’s license

Newcomers can typically only drive with their foreign license for up to 90 days: after that a provincial driver’s license is required. Some provinces may have reciprocity agreements with certain countries, allowing newcomers to exchange their foreign licenses for a local license — or skip parts of the licensing process. Make sure you check your province’s licensing rules and understand the steps needed to obtain your new Canadian driver’s license.

Understanding the rules of the road

Driving in Canada can be different from what you’re used to, especially if you’ve never driven on the right side of the road or in winter conditions. It can be helpful to take a few local driving lessons, even if you have years of experience in your home country. These lessons will help you adapt to Canadian road signs, winter driving techniques, and the overall Canadian driving culture. As with most things, the more often you get on the road, the more confident you’ll feel driving in your new country.

Canadian winters demand specific vehicle preparation, and this should not be taken lightly. Essential winter equipment includes winter tires (mandatory in some provinces), a battery rated for cold weather, winter-grade windshield washer fluid, and a car emergency kit containing items like a snow shovel, jumper cables, and blankets. Many Canadians also rust-proof their vehicles to protect them from road salt. Scheduling regular maintenance checks before and during winter months will ensure your vehicle remains reliable in the often harsh Canadian winters.

Buying vs. leasing as a newcomer to Canada

Once you have a provincial driver’s license, you’ll need to decide whether you want to buy or lease your vehicle, taking into account your financial situation, driving habits, and long-term plan.

Advantages of buying

• Ownership: You have full ownership of the vehicle once it’s paid off

• No mileage limits: Unlike leasing, buying does not restrict how much or how far you can drive

• Potential resale value: You may be able to sell the car and recoup some of your investment at a later time

Disadvantages of buying

• Higher monthly payments: Buying usually requires a large upfront payment or larger monthly payments than leasing

• Depreciation: Cars lose value over time, which impacts your investment

• Financing challenges: Most financial institutions require good Canadian credit history for car loans, which can sometimes be an issue for newcomers who don’t have Canadian credit history. However, some banks, like RBC, offer auto financing options for newcomers without a credit history

Tip: Be cautious of scams when buying a vehicle, especially when dealing with private sellers. Verify the vehicle’s history and authenticity.

Advantages of leasing

• Lower monthly payments: Leasing typically has lower monthly costs compared to financing a car purchase

• Access to newer models: Leasing allows you to drive a newer vehicle with the latest features

• Flexible options: At the end of your lease, you can choose to buy out the lease, return the car, or lease a new vehicle

Disadvantages of leasing

• Mileage restrictions: Most lease agreements come with mileage limits, which may be restrictive based on the overall frequency and distance of your driving 

• No ownership: When leasing, you do not own the car and won’t have the option to sell it later

• Financing for leasing: Leasing may also require a credit check, which might be difficult if you do not have a long enough Canadian credit history. If you choose this option, it’s important to research leasing companies and explore options tailored for newcomers with limited or no credit history 

Should newcomers to Canada buy or lease a car?

The decision to buy or lease a car should be based on carefully weighing several factors. Ultimately, your vehicle should serve as a tool that supports your broader goals of settling in and thriving in Canada.

Evaluating your driving habits and needs

Consider how often and for what purpose you’ll be using the vehicle. If you plan on long commutes or frequent trips, buying may be a better option as leases come with mileage caps.

Assessing your financial situation

Look at your overall budget, including the cost of parking, insurance, maintenance, and fuel. If you’re considering an electric vehicle (EV), factor in access to charging stations.

Insurance costs in Canada can be higher for newcomers due to the lack of Canadian driving history. Expect to pay between $1,500 to $3,000 in insurance annually, depending on your location and vehicle type. To reduce premiums, consider taking a certified defensive driving course, installing winter tires, and maintaining a clean driving record. Some insurance companies offer specific newcomer packages or accept driving histories from select countries, so shop around for the best rates.

Considering your long-term plans

Think about how long you plan to stay in Canada. If your stay is temporary, leasing relieves the pressure of having to sell the vehicle once it’s time to return home. However, if you see yourself settling down long-term, buying may be more beneficial for building equity and exploring our great country.

How to buy a car in Canada

Buying a car in Canada is a significant step for newcomers. It involves exploring options, comparing prices, and completing the necessary registration to make the vehicle yours. This option offers ownership but often comes with higher initial costs.

Finding the right car

Everyone wants to find the right car, but patience is key. Take your time in researching the right model for your needs. Do you need a large vehicle for your family, like an SUV or minivan? Are you a solo driver looking for something compact and easy to park? Do you want a gas-powered vehicle or an EV? Take your time, research your options, and decide on a realistic budget.

Explore both dealerships and private sellers to find the best deal. Dealerships often provide certified pre-owned options with warranties, while private sellers may offer lower prices but require thorough checks to avoid the potential of being sold a lemon or worse: a stolen vehicle.

Financing a car 

Most lenders prefer a 10-20% down payment, though some offer zero-down options for newcomers. If you are able to, having a downpayment for your purchase will reduce your monthly expenses and the overall cost of your vehicle.  Many dealerships have partnerships with specific banks to process car loans, but you can also choose to secure financing through your own bank or credit union. Getting pre-approved is a smart move as it helps you understand your budget and strengthens your negotiating power when shopping for a car.

When financing a car through a dealership in Canada, you’ll need the following documents:

• Valid government-issued photo identification (e.g., driver’s licence or passport)

• Proof of income (e.g., recent pay stubs or a letter of employment)

• Proof of residence (e.g., utility bill or rental agreement)

• Social Insurance Number (SIN) for a credit check

• Additional documents such as bank statements or references (optional, depending on the lender)

If you’ve found a car privately and would like to finance this purchase, you will need a few extra documents, such as:

• Bill of sale detailing the car, seller, and purchase price

• Proof of insurance

• Safety inspection report (to meet provincial regulations)

Make sure to check with your bank or credit union for specific requirements related to private sale financing.  It is important to ensure private sale contracts include the vehicle details, purchase price, payment terms, known issues, and both parties’ information.

Negotiating the best price

Don’t be shy. Whether you are speaking with a dealer or private seller, it is expected that some form of negotiation will happen when buying a car. Research the market value of your chosen car model and use this information to get the best price.

Registration and licensing requirements

Before buying and registering a car in Canada, it’s essential to check the vehicle’s history to ensure there are no hidden issues such as outstanding liens, stolen status, or significant accident history. Use services like CARFAX Canada for a comprehensive report.

Once you’ve got an all-clear and have bought the car, you must register it with your provincial motor vehicle department to establish your ownership and licensing of the vehicle. This can be done at your provincial or territorial motor vehicle department.

How to lease a car in Canada

Leasing a car in Canada can be a practical choice for newcomers seeking lower monthly payments and flexibility. It’s important to understand the terms, conditions, and what happens at the end of the lease to make the right choice for your needs.

Lease terms and what to watch out for

Understand your lease terms, including monthly payments, mileage limits, and maintenance responsibilities. Check for hidden fees, such as early termination charges (if you decide to leave the country before your lease is up). It’s crucial to read the fine print and ask questions about anything that seems unclear.

Pay special attention to wear-and-tear guidelines, as these can sometimes result in unexpected charges at the end of your lease. Make sure you understand what constitutes “normal” versus “excessive” wear, and document any existing damage before taking possession of the vehicle.

In addition, be clear about insurance requirements and gap coverage options, as these can significantly impact your total costs over the lease term. If you plan to drive more than the standard mileage allowance, consider negotiating a higher mileage limit upfront, as excess mileage fees will be expensive.

Financing a lease 

In Canada, newcomers can finance a lease option for vehicles, though the process may come with additional requirements. As with purchasing a vehicle, leasing companies often check credit history, which can be difficult for newcomers without an established Canadian credit profile. Some companies may accept some newcomers’ credit profiles from their home country, or require a larger down payment. Providing proof of stable income and employment is essential, and also having a co-signer with a strong credit history can improve lease approval chances. Some dealerships and banks also offer newcomer programs with flexible terms to make leasing a more accessible choice to newcomers.

Understanding lease-end options

At the end of the lease, you’ll need to decide whether to return the car, lease a new one, or buy out the lease. Evaluate the car’s condition and market value before making a decision. Consider factors like mileage, wear and tear, and any potential fees for excess damage. If you’ve taken good care of the vehicle and it’s worth more than the buyout price, purchasing might be your best option.

On the other hand, if you’re ready for something different or the car has had maintenance issues, returning it and starting fresh with a new lease could make more sense. Remember to check current market conditions and interest rates, as these can significantly impact your options.

Tips for saving money on your car purchase or lease

Saving money on a car purchase or lease is essential for newcomers looking to manage their finances wisely. By taking advantage of special offers, timing your purchase, and exploring newcomer discounts, you can reduce costs to make purchasing or leasing a vehicle more affordable.

Taking advantage of special offers

Check for new customer deals at your local car dealers. Buy during slow seasons or year-end sales to save money. Car dealers want to sell their cars in December to make space for new ones, so prices are often lowest then. Shopping at the end of the month can help too, since salespeople want to hit their sales goals.

Look at car maker websites and local ads for good financing deals or cash back. If you just graduated college, serve in the military, or are buying your first car, you might get extra savings – it never hurts to ask.

Get on the road

Ready to start your car-buying journey? RBC offers specialized car loans designed specifically for newcomers to Canada, with flexible terms and dedicated support to help you navigate the process. Visit RBC’s newcomer hub to explore your financing options, get pre-approved for a car loan, and access expert car-buying tips. With the right financial partner and preparation, you’ll be confidently driving on Canadian roads in no time. Welcome to Canada – your journey starts here.