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Owning a car gives you the freedom to go wherever you want on your own schedule, but there are costs that you may not consider before you first take the wheel. If you’re looking to create a budget for your next car, take these factors into account when determining the cost of car ownership.
How much does a car cost in Canada?
The average car cost in Canada is at an all time high, according to the April 2022 AutoTrader.ca Price Index. The average price of a used vehicle can range between $33,359 and $46,651, while the average price of new vehicles can range from $39,755 to $69,960.
Keep in mind that you’ll have to pay far more than the MSRP (manufacturer’s suggested retail price) to own a vehicle. There are many other costs to budget for including financing fees and interest, gas, maintenance, insurance, parking and more. Below we breakdown the full cost of car ownership in Canada.
What is the actual cost of owning and driving a car?
To help give you an idea of the overall cost of owning and driving a car in Canada, let’s look at an example of a 2017 used Honda Civic in Ontario with a sticker price of $18,098. Looking at a basic summary of ongoing expenses, the total cost of buying and driving this car would be $988 per month, which amounts to $11,856 per year.
Car expense
Monthly budget
Financing
$325
Fuel
$165
Maintenance
$190
License and registration
$10
Insurance
$298
Total monthly car cost:
$988
These numbers are just examples to help give you an idea of the cost of owning a car. Our example car was relatively old, so if you own a newer car, you’ll likely spend less on maintenance each month, but potentially more on the monthly payment.
You could end up paying more or less for car insurance depending on where you live and your driving history. The cost of gas will also vary depending on how much you drive.
Car ownership cost breakdown
Here’s how the individual expenses can factor into the total cost of car ownership.
1. Financing
Unless you plan on paying for your car with cash, you’ll have monthly car loan payments that could last anywhere from 3-8 years depending on the loan term you choose. While a longer term will make for lower monthly repayments, you’ll end up paying more in interest in the long run. You can learn more about car loan interest rates by reading our full guide here.
The best way to make sure you get a competitive interest rate and favourable loan terms on a car loan is to compare your options before signing on the dotted line. To help you out, we’ve compiled a list of auto finance options you can easily compare in the table below.
In our example, we want to finance a Honda Civic that costs $18,098 in Ontario, which means you need to add 13% car sales tax. Let’s say you also pay a 20% down payment on the car, and you want to finance it over 5 years at 5.99% interest.
Our Civic will cost about $325 a month to finance, or around $3,900 annually.
Car loan cost calculator
Learn how much your car financing will cost per month and by the time you've finished paying it off
Enter the amount you want to borrow to buy a car under “Loan amount.” Add sales tax on to the sticker price, and if you’re making a down payment, be sure to subtract the down payment from the total loan amount.
Write the amount of time you have to pay off your car loan under “Loan terms” (in years). If your loan term is in months, divide it by 12 first.
Enter the interest rate you expect to pay on a car loan under Interest rate. If your car loan comes with fees, enter the annual percentage rate (APR) instead.
Click “Calculate.”
In addition to your monthly payment, this calculator shows how much you’d pay on your loan’s principal amount and how much you’d pay overall in interest. The principal amount is the amount that you borrowed and should be equal to your loan amount. Total interest is the amount you would pay on top of the principle, the cost of having your loan.
2. Fuel
You can look up most cars’ fuel economy ratings using the search tool on the Natural Resources Canada website. This helps you choose vehicles based on your personalized needs and information about fuel consumption for different makes and models.
The price of fuel can fluctuate on any given day by as much as a few cents per litre. Depending on your car’s mileage, the overall cost of filling the tank could be higher or lower each month as well.
The average annual fuel cost for the Honda Civic in our example is $1,960 a year, assuming you were to drive 20,000 km per year (with gas costing $1.40/L). That’s close to $165 per month.
3. Maintenance
Budgeting for common car maintenance costs now can help you cover expensive repairs down the road. Visiting a mechanic regularly means you may be able to spot problem areas before they crop up — which is especially important whenever your car is out of warranty.
The CAA Driving Cost Calculator provides a rough estimate of how much you might pay for maintenance for different makes and models when following the manufacturer’s recommended service schedule.
Oil changes, tire rotations and new brakes are essential to keeping your vehicle in the best condition possible, but each comes with a new cost. If you’ve got the skills and the equipment, it’s possible to do each of those jobs in your own driveway and save a bit of cash.
Oil changes can cost anywhere from $50 to $100
An average brake job can run between $600 and $1,500
Tire rotation can cost as much as $20 per tire
Keep in mind that depending on your insurance coverage, you may have to pay extra to repair car damage caused by an accident.
Keeping our Honda Civic maintained could cost around $2,280 annually, or $190 a month.
4. Licence and registration fees
You can calculate a portion of your car’s cost to own by adding these smaller expenses together:
Registration. Your province or territory’s annual motor vehicle registration fee will be a regularly occurring cost no matter what car you buy.
Fees. Parking fees, emissions testing, tolls and other minor fees can make owning a car significantly more expensive depending on where you live. Add these regular fees together to see how much it might cost you every month — then multiply that number by 12 to get the yearly cost.
Taxes. You may also need to add in the cost of sale and use taxes. These will vary based on the value of the car you buy and where you live.
Let’s say, just to be safe, we budget in $120 per year for extra fees or charges related to driving our Honda Civic.
5. Insurance
You’ll typically spend between $1,000 and $3,500 per year on car insurance – though this varies widely depending on the coverage you opt for, your driving record, where you live and other factors. Insurance is one of the biggest expenses to consider when looking into the cost of owning a car.
For reference, the average cost of car insurance per year in Ontario is $1,505, while the Canadian average is $1,143, according to the Insurance Bureau of Canada.
Where you drive within your city can even have a huge impact on the price of insurance. According to RATESDOTCA, someone living in the Don Valley West/Eglinton-Lawrence area of Toronto could pay $1,695 annually for car insurance, while someone living in the north part of Etobicoke could pay $2,864 per year.
The best thing you can do is compare your auto insurance rates before signing or renewing with a company to ensure you’re getting the best rate for your situation.
Each car insurance company has its own underwriting process, meaning they will all assess your risk factor differently. That can result in you qualifying for similar policies from various companies that differ by hundreds of dollars in overall cost. Read our full guide to car insurance in Canada here to compare your options.
To determine your estimated Honda Civic insurance cost, we aggregated quotes from insurance companies using this profile:
2017 Honda Civic EX-T 4dr
20,000 km driven yearly
35-year old female driver living in Toronto, Ontario
No accidents, perfect driving record
Our estimated price is for comprehensive coverage, which includes the required minimum third-party liability coverage, collision, and vandalism and theft protection.
Because the driver of our Civic lives in Toronto, Ontario, we can estimate the average cost of car insurance is $3,581 annually, or $298 a month.
How does depreciation factor into my car costs?
Depreciation is a car’s loss of value over time. It isn’t an out-of-pocket expense like the other factors on this list, but it impacts the total cost of your car. In general, new cars lose over 20% of their value within the first year. And by the end of five years, a new car may lose 40% – 50% of its value.
Opting for a car that has a slower rate of depreciation can help you avoid becoming upside down on your car loan – meaning you owe more than your car is worth. And taking steps to reduce your car’s depreciation can help you get more money when you decide to sell or trade it in down the road.
The cost of car depreciation for our Civic works out to around $1,140 per year.
Car ownership cost annually
After adding all of those costs together, the annual total cost of owning our Honda Civic, including deprecation, would be $12,996 per year, or $1,083 per month. But keep in mind, that since you don’t directly pay for the cost of depreciation, the total amount you would need to budget annually for out-of-pocket expenses is $11,856, or $988 per month.
Extra costs to consider:
Parking. Parking in cities like Toronto, Montreal or Vancouver can be pricey. Underground parking garages in big cities can run from $50 a month all the way up to $375 a month. Be sure to consider where you’re going to leave your vehicle when it’s not in use.
Accidents. It’s something nobody likes to think about, but it’s possible that your car could be damaged in a crash. Crashes can cost thousands of dollars depending on the severity. Insurance is there for a reason though so if you’re not at fault, you should be covered for this expense.
Winter tires. A good set of winter tires is essential for driving in Canada. Some provinces even require it by law. A set of 4 winter tires can run between $250 and $500 or more.
How can I lower the cost of owning a car?
From opting for a used car to keeping up with maintenance, here are a few ways to lower the cost of car ownership:
Buy used. If you’re stuck between a new and a used car, opt for lightly used. Someone else has already taken the brunt of the depreciation, so you can pay far less for a car that’s nearly as good as new. A good rule of thumb to remember when shopping for a used car is to estimate that someone has driven about 20,000km per year. So a 3-year-old car should have about 60,000km on it.
Don’t go too cheap. Buying the cheapest car you can find isn’t necessarily going to save you money, as it could cost more to maintain and could get bad gas mileage.
Refinance your car loan. An expensive car payment is a quick way to suck your budget dry. If your credit has recently improved, you may find that refinancing your car loan is an easy way to lower your monthly repayment. You can compare low interest rate car loans using our guide.
Shop for a new insurance quote. Like your monthly payment, a high insurance premium can add to the cost of car ownership. Take the time to shop for quotes and see what another provider may be able to offer.
Bigger doesn’t mean better. A bigger car can cost significantly more than a sedan or hatchback.
Maintain your car regularly. Car manufacturers recommend regular servicing and maintenance – it’s often required to keep your warranty in effect. This can reduce the risk of a more expensive repair later on and keep the total lifetime car ownership cost down.
Looking to finance a car? Compare car loans
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How can I calculate the cost of car ownership?
You can start by trying to get accurate estimates for all of your different car costs.
Car price. Decide which car you want to buy, and narrow down your options. If you want to buy used, check car sites like AutoTrader.ca and Kijiji to get an idea of how much that car is going for.
Car loan. Get preapproved for a car loan so you know what interest rate you might qualify for.
Insurance. Shop around for car insurance. A car insurance broker can give you multiple quotes from one application.
Repairs. Estimate how much you’ll need to spend on maintenance. The older the car is, the more you’ll need to set aside.
Fees. Look up how much it costs to register and renew your car’s registration in your province.
You can also use online resources like the CAA Driving Cost Calculator here as a shortcut. That calculator gives you a yearly estimate for different makes and models by taking 5 factors into consideration – alongside depreciation – to give you an idea of the cost of owning a car in Canada based on a 5-year long loan or lease.
Bottom line
The cost of a car in Canada extends far beyond the sticker price. You’ll need to pay for financing, insurance, gas, maintenance, fees and depreciation – which brings the overall cost to tens of thousands of dollars during your years of ownership. Using this guide to understand the average price of a car and how much a car actually costs to own and drive, will help you budget more effectively and choose a car you can afford.
When you’re ready to hit the dealership, compare car loans ahead of time to find the best rate available to you — and lower the cost of your car payment.
Chris Arnold was a writer for Finder. Chris is experienced in both print newspaper and digital publications. He has written for papers from Montreal to Vancouver under the Postmedia chain and tackled Toronto’s luxury real-estate market for the Globe Content Studio. Chris has a bachelor’s degree in media studies with a specialization in journalism from the University of Guelph and a diploma in media communications from Humber College. When not writing, he spends his time playing guitar.
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