Deals on wheels

How to save on your next family car

A few years ago, my mechanic sent me a large gift basket for Christmas. He may have been moved by the holiday spirit, but I suspect his generosity had more to do with the $9,000 I’d spent that year on minivan repairs. That was the last straw: I sold the van and cut my losses. And I vowed that the next time I bought a vehicle, I would do it right.

Owning a safe and comfortable vehicle is a priority for most Canadian families. But buying one is a daunting task. Do you really need an SUV, or will something smaller be a better fit? Will a used car cost you more in repairs than buying new? If you do buy new, how can you get the best deal?

The answers depend on where you find value in a vehicle: Is it convenience, peace of mind or just the lowest possible payment? Here’s help to figure out what matters to your family, and how to get it.

Gear down, big rig: Make do with less

Our new minivan makes it easy to travel with our three girls. Often, though, I’ll leave the van at home and cram the car seats into our second car: a Chrysler Cirrus. It’s a tight squeeze, but I get much better mileage, and I love that I can reach back and dole out juice boxes and pacifiers, as needed.

It wasn’t long ago that three kids and two adults got by just fine with a four-door sedan, but today many families take it for granted that they need an SUV or a minivan. If you’re looking to save money on your next family vehicle, however, consider getting by with something smaller.

“Crossovers and SUVs tend to be more expensive and less efficient compared with a similar-sized wagon or hatchback,” says Fredericton automotive journalist Mark Atkinson, who writes a blog at drivingguy.com. Wagons and hatchbacks can cost 30 to 50 percent less than a minivan or small SUV, and are much less expensive to insure and fill with gas. Atkinson says the Mazda5 (base price $20,495) and Volkswagen Golf Wagon ($22,675) are big sellers with families, and even smaller hatchbacks, such as the Mazda3 ($15,995), Toyota Matrix ($16,665) and Nissan Versa ($14,198), make great kid haulers.

It’s not necessarily true that crossovers and SUVs are roomier and can carry more stuff. Carolynn Kuffner-King of Airdrie, Alta., dropped more than $50,000 for a full-sized SUV with eight seats, only to be disappointed. “The SUV wasn’t as kid-friendly as we’d hoped,” she recalls. “It sat so high that lifting the stroller in was painful, and there was no cargo room.” Kuffner-King wasn’t ready to downsize to a hatchback, but she eventually traded the SUV for a minivan that was 40 percent cheaper. “We’ve saved $250 a month on the payments, and we’re spending a lot less on gas too.”

As Kuffner-King learned, larger vehicles aren’t just more expensive to buy, they’re also much more costly to operate. SUVs guzzle fuel (many require premium gas) and carry higher insurance premiums. Even minivans can cost thousands of dollars more to operate than comparably priced sedans, according to the Canadian Automobile Association. The CAA recently looked at cost comparisons for a typical minivan (which cost $20,945 new) and a four-door sedan ($18,425) and found that the minivan driver would spend about $8,568 per year on insurance, licence and registration, finance costs and depreciation, while the sedan driver would spend just $6,257. Operating costs, which include fuel, maintenance and tires, were $750 more for the minivan driver as well. So over five years, a family who downsizes to a sedan could save $3,700 in operating costs.

If you’re considering a smaller vehicle, Atkinson recommends asking the dealership for an extended test drive, or even renting your potential purchase for a day. “Jam it full of all the stuff you think you’ll carry regularly, get in and out of all the seats, check your blind spots, install the car seats.”

Buy used: But look under the hood

Experts estimate that new vehicles lose an average of 20 percent of their value in the first year, so buying a car that’s just a few years old can be great deal. It may also put you in a higher-quality vehicle you wouldn’t have been able to afford brand new. For about the same price as a new Kia Sedona, you may be able to drive a three-year-old Honda Odyssey, often touted as the best minivan in its class.

Still, when you buy a used car, it’s hard to shake the fear that you’re going to face endless repairs. If you’re considering a pre-owned vehicle, there are several ways to increase your odds of a positive experience.

First, research specific models. I bought my first minivan from a friend of a friend, without considering how it would suit our family. We ended up hating it because it was incompatible with three car seats. Had I done a simple online search of the model with the word recall, I would have found hundreds of complaints. Consumer Reports publishes a special car issue in April each year and publishes its ratings online at consumerreports.org (you need to pay a small fee). Pick up Phil Edmonston’s latest Lemon-Aid guide, or visit lemonaidcars.com for info on the best and worst buys, updated monthly.

Before you buy, get the car’s vehicle identification number (VIN), which will be on the registration paperwork and printed on the driver’s corner of the dashboard. You can use this 17-digit number to learn the vehicle’s history, such as whether it’s been in an accident. Services such as carproof.com will do this online for a fee; your province’s transportation ministry may also be able to provide a report.

Have the car inspected by a certified mechanic before you buy: Don’t rely on a previous inspection done by someone you don’t know. And ask for service records and receipts, says Josh Bailey, director of client services for canadianblackbook.com, a site that provides used car values, reviews and listings. “If you are presented with the service history, you know that the vehicle has been properly maintained.”

Finally, if you’re buying a used car from a dealer, consider an extended warranty. After my first minivan nightmare, I bought our next vehicle at a dealership that extended the warranty on the van for an additional three years for $1,600. Just two minor repairs have already made the extra money worth it, and I still have two years of coverage left. However, Atkinson suggests reading the fine print carefully. “It’s very important to determine exactly what is covered, for how long, and up to what amount. Some will say ‘bumper to bumper,’ but exclude anything related to the engine or transmission.”

Buy new: But choose value over vanity

New cars are not immune from repairs, but they come with a warranty that usually protects you from major expenses in the first few years. Many busy parents who would be paralyzed without their wheels take comfort in that. What’s more, low-cost automakers, such as Hyundai and Kia, have made owning a new vehicle easier for budget-conscious parents, without the risk that second-tier brands used to carry.

You pay a premium for a brand such as Honda or Toyota, but you also receive a premium when you sell. On canadianblackbook.com, you can run comparisons for any make, model or year. For example, a 2010 Honda Odyssey DX priced at $31,690 has an expected value of $10,040 in five years, or 32 percent of its original value. A Dodge Grand Caravan SE bought new for $20,945 has an expected five-year value of $5,090, or 24 percent. If you plan to sell your wheels in four or five years, paying more up front for a model with higher resale value may make sense. If that’s not important, consider a less expensive brand with an excellent warranty, and plan to keep the vehicle until the bottom falls out.

Whatever you decide, set a firm budget before you set foot in the dealership. (Don’t forget to budget $500 to $1,000 for administration and registration fees.) It may help to use a service like carcostcanada.com, which lets you see dealer prices so you can compare options and incentives.

One of the easiest ways to reduce the cost of a new vehicle is to forgo extras. A car that is advertised as “starting at $19,500” can quickly hit $24,500 with a few frills.

“Pass on special wheels, high-end stereos and DVD players,” says Lauren Fix, a New York–based automotive expert and mom of two. “However, never give up safety features like airbags, stability control, and ABS and traction-control systems. These items will keep your family safer on the road.”

Buy or lease?

Once you’ve decided on a family roadster, the most important financial decision you’ll make is whether to buy or lease.

When you buy from a dealer, you’re typically offered a choice of incentives: Pay for the vehicle in full and receive a cashback rebate, finance the car at a low interest rate, or opt for a low-rate lease. How do you decide which is right for you?

Leasing appeals to many parents because the low monthly payments put less strain on their cash flow during a time when expenses are probably as high as they will ever be. But leasing is always more costly in the long run. Say you’re considering a lease so you can pull up to preschool in a $45,000 Volkswagen Touareg, rather than financing a $26,000 Hyundai Santa Fe. Both would have a similar monthly payment, but after four years, you’d own the Santa Fe free and clear, while you’d have to return the Touareg to the dealer or buy it out, probably for thousands of dollars more than its book value. There are several online calculators to help you do the math and compare; find one at citizensbank.ca (click on the Calculators tab).

Taking over someone else’s commitment may be more economical. Sometimes people put a large down payment on a car, and then find they can no longer afford to carry the lease. By taking over their monthly payments, you may be able to get a great deal at their expense. Taking over a lease can be a smart move for families with short-term needs, says Randy Warren of leasebusters.com. “If you have one child, you can lease a car for a short period, and when that term is up, you can then lease a slightly bigger sedan or a minivan for two or more years.” He recommends paying close attention to the term of the lease, the down payment made, the mileage allowance remaining and the condition of the vehicle.

Deciding between a cash rebate and low-cost financing is more complicated and will require you to do some calculations. Even if you have the cash, you may be better off financing at a very low rate (some dealers offer loans at less than one percent these days) and keeping your money in a savings account where it will earn more. Or you may be able to borrow using a home equity line of credit (a loan secured with your house) to take advantage of the cashback offer and still pay a low interest rate.

No wheels? No problem

I took driving lessons when I was younger and have my learner’s permit, but I’ve never gotten my licence. My partner, Don, has never driven. Having a car just never seemed necessary.

We live in Calgary, and transit access in our neighbourhood is pretty good: We’re only 10 minutes from the train station. We also have an incredible path system near our home. Our route to the train is along the river, so it’s like a mini nature walk. We’re lucky to have a school nearby — our son, Robert, started kindergarten in September. Last winter, Don used a sled to take him to preschool when there was a lot of snow, or sometimes we use a wagon.

When Robert was little, it was really handy to put him in a sling and walk to the bus. Once he got too big for that, we started using a stroller, so that was hard in the winter. There has been the odd time when Robert was sick and my mom had to drive us to emergency, but day-to-day it’s fine.

There are certainly inconveniences to not having a vehicle, but we’ve learned to manage. I’ll pick up a few groceries on my way home from work, but we also belong to a food co-op and, occasionally, we’ll stock up at the Superstore and take a cab home from there.

Some things can be difficult without a vehicle, such as extracurricular activities in different areas of the city. Occasionally, I rely on taxis when I haven’t allowed enough time to get somewhere, but I’m trying to be more organized and avoid those times. I’d say that’s only once or twice a month.

We may feel housebound in the winter, but probably no more than families with cars. And I think the trade-off is that Robert gets more time outdoors and more exercise, which is important to me. I worry that if we did get a vehicle, we would fall into those habits many people have of driving to the corner store. We build exercise into the day through walking or biking. Robert uses his scooter a lot.

I’m now working in a distant suburb — the first time I’ve worked that far from home — and it’s getting more challenging. My commute is 60 to 90 minutes on the train, so I’m spending less time at home with my son. I can certainly see joining a car co-op someday to have a bit more access. Who knows what will happen in the next couple of years?

— Tamara Ewashen, as told to Sarah Deveau