Many people across Canada believe owning a car is cheaper than taking public transit, but that might not always be the case. For most Canadians, owning a car is the second-biggest monthly expense for them. Transport typically takes about 20% of after-tax income for Canadians. When factoring depreciation of the vehicle, owning a car could cost thousands a year for the average Canadian. For rural Canadians, not owning a car may not even be possible. Driving on snowy country roads requires constant maintenance, and you can’t drive a clunker in those conditions.
Plenty of Canadians know how much they’re paying monthly for their vehicle, but what about hidden costs that many don’t consider? Auto insurance prices are on the rise across Canada, which also increases the cost of vehicle ownership. Insurance costs depend highly on the type of vehicle you own and its age and your driving record. But there are other factors that you may not consider. Your address also impacts the rates you pay. Most Canadians expect insurance prices to vary wildly between provinces, but did you know it can vary even between neighborhoods?
Another hidden cost that people don’t consider is the price they pay at the pump. Cars and compact vehicles will be less fuel hungry than a massive truck, which can eat up thousands per year in fuel costs. To determine how much you spend in gas per year, you’ll need to know the fuel efficiency of your car, how many kilometers you travel each year, and an estimate of gas prices. Most Canadians tend to travel around 20,000 kilometers per year, but this is highly subjective to how much you drive, especially with more employers now being open to the idea of working from home.
Oil change, tire rotation, and other little maintenance costs can really add up through the years of car ownership. That’s especially true if you’ve signed a 72-month loan. Most Canadians spend hundreds per year on vehicle maintenance, but those costs can skyrocket for older vehicles, as they tend to spend more time in the repair shop, really putting a dent in your household budget. Winter tires are also important in many parts of Canada, but having to buy these more expensive tires only to have them swapped out in the spring for another set, can be quite costly.
Another hidden cost that many don’t consider is parking fees in large metropolitan areas like Toronto and Vancouver. You know just by trying to park for a day’s visit, let alone staying at a hotel overnight, parking is at a premium. It’s no wonder that having a parking permit can cost you hundreds of dollars per year depending on the downtown area.
Depreciation is the mother of all hidden costs because no matter how well you take care of your car, it decreases in value the older it gets. New vehicles automatically lose upwards of 10% of their value as soon as they are driven off the lot and it only decreases from there. Depreciation is the steepest in the first year of new car ownership, but slows down from year two until year six, so hopefully value remains by the time the loan is finally paid off.