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Inexpensive autos

How to buy a car for $200 per month Add to ...

Thousands of Canadians have the number 200 in mind when they go shopping for a new car – as in a $200-per-month car payment. And they are undoubtedly pleased and surprised to find a wealth of options in that price range, too.

Globe Drive counts a dozen solid new cars that can be had for $200 a month, full warranty and roadside assistance included. And no, there isn’t a miserable sameness about them, either.

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For $192.87 a month you can drive away in a stylish, fuel-efficient and reliable Hyundai Accent subcompact sedan. The Accent has been a hit for Hyundai, landing among the top 10 best-selling cars year after year. Yes, it’s true that to get that Accent payment below $200, you’ll need to stretch out the payments for 96 months, but a savvy buyer should be able to reduce the purchase price by nearly $2,000, once dealer and factory rebates are combined. Not bad on a car with a $14,649 price tag.

Or perhaps you want your own version of Canada’s best-selling car, the Honda Civic. The 2014 model is getting an update, so leftover 2013s are a steal. You can grab one with a manual transmission for $208.31 a month for 84 months.

And on the list goes. Chevrolet can put you in a Spark hatchback for $192.77 a month and Kia has a Rio at $203.24. The payments will stretch for 84 months, but the interest on both loans amounts to peanuts – 1.99 per cent from Chevy, 0.99 per cent from Kia.

Mazda has just introduced a revamped 2014 Mazda3, so leftover 2013s are a bargain, if you can find one. Rui Martins, general manager of Prima Mazda in Woodbridge, Ont., says he stocked up on the 2013 Mazda3, anticipating strong demand. The 2014 is an excellent car, he says, but “people come in and see what we’re offering on the 2013 and some are really interested. They’re happy to get the 2013, even though Mazda made a lot of improvements to the 2014 Mazda3,” he says.

Car companies and their dealers work the marketplace this way all the time. They must. Canadians are savvy car shoppers who rarely find themselves emotionally out of control when they confront the latest new model. We like our cars, but we don’t generally love them or become obsessed by them, as Americans do.

“If we don’t have the right pricing and package, most buyers will walk away and wait,” says Mazda Canada president Kory Koreeda.

Canadians also are willing to buy a slightly bigger used car that sells for about the same as the most affordable subcompact or compact cars in Canada when new. Say, a three-year-old Honda Accord over a new Civic. True, the used model does not have a new-car warranty, but many certified used cars come with factory coverage that helps to take the fear out of buying someone else’s old car.

The used car market is a jumble, however. What you get for less money thanks to depreciation comes at the price of uncertainty about who owned that used car and how the owner cared for it.

Obviously, loads of Canadians buy used and that’s fine. But recognizing that they want the security of a factory warranty and a dealer to manage it, Globe Drive went looking for a dozen brand new cheap cars available for $15,000 or less, factory incentives included.

We enlisted the help of the buying/pricing service Unhaggle.com. We found ourselves looking at a mix of 2013 and 2014 models, most with manual gearboxes, though some do have an automatic transmission. Low interest rates, extended term financing offers and rich incentives make the $200 a month car “realistic to own,” says Unhaggle CEO and co-founder Andrew Tai.

In all cases, the $200 a month payment schedule is based on a financed purchase, not leasing. Tai and others point out that the residual values of entry-level vehicles are generally subpar and Detroit-based car companies “still don’t really have competitive leasing programs (either non-existent or rates are ridiculously high).” So this list is all cars for purchase.

It also comes with a warning. Long loan terms and easy credit have resulted in a jump in the number of buyers with negative equity – buyers who are upside down. That is, the loan balance is more than the actual car value.

According to the Power Information Network (PIN), nearly one of every three Canadian trade-in vehicles is worth less than the amount owed on the outstanding loan. PIN data also suggest that this is not a blip, but a trend. About a third of Canadian buyers have been in a negative equity space every month for more than the last year.

So while the $200-a-month new car is attainable and there are plenty of options for consumers, the downside of a small monthly payment is the long term and the potential to find oneself upside-down when it’s not convenient.

In short, then, consider these $200 deals, but put them in the context of your circumstances and options today and years down the road.

If you have questions about driving or car maintenance, please contact our experts at globedrive@globeandmail.com.

Follow us on Twitter @Globe_Drive.

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