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How much does it really cost to own a car?

Your monthly expenses don't stop at your car loan payment.

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.

What is the actual cost of owning a car?

The average cost to own a compact car is estimated to be up to $13,000 per year. For example, according to the Canadian Automobile Association (CAA), a 2017 Honda Civic, which is a fairly standard car to see on the road, could cost more than $8,000 to operate annually when driven in Ontario.

This amount represents vehicles driven about 20,000 kilometres a year and includes the cost of fuel, maintenance, repairs, insurance, fees, depreciation and loan payments. The loan payment alone in our example is estimated to be $216 a month.

However, these numbers are just averages to help give you a budgeting guideline. Your actual cost of car ownership will differ depending on how often you drive, where you live, what you drive and other factors.

What is the average cost of owning a car per month?

As an example, we’ve listed the costs of owning a used 2017 Honda Civic DX 4D Sedan 6sp, with 100,000km at the time of purchase, on Ontario roads. We’ll also assume that you’ll keep the Civic for 5 years.

The driver in our example could expect to budget around $740 per month for this car. You can see a breakdown of the approximate monthly car costs in the table below.

Car expenseMonthly budget
Financing$220
Fuel$160
Maintenance$190
License and registration$10
Insurance$160
Total monthly cost:$740

Keep in mind that 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.

  • Our hypothetical Civic will cost about $216 a month to finance, or $2,603 annually. That is assuming you paid a 15% down payment.

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 at the time of writing for our Civic is $1,931 a year, assuming you were to drive 20,000km per year. That’s about $160 per month

3. Maintenance

By budgeting for common car maintenance costs, you can prevent 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 an 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 Civic maintained would cost $2,256 annually, or $188 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.
  • The licence and registration fees on our Civic come in at $82 annually. But that doesn’t account for parking and other fees.

5. Insurance

You’ll typically spend between $1,000 and $2,000 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 most important things to consider when looking into the cost of owning a car.

For reference, the average person in Ontario pays $1,920 per year for car insurance, while the Canadian average is $1,151.

Insurance for our Civic comes in at more than $1,800 annually, assuming the driver is less than 65-years-old, has 6 years of driving experience without an accident, lives either in the suburbs or the city and has the car for personal use.

Where you drive also has a huge impact on the price of insurance. The average person in Brampton, Ontario pays $2,500 per year for car insurance. Down the road in Kingston, Ontario, drivers pay an average of $1,100 per year.

For more information on car insurance in Canada, you can check out our guide here.

  • Because the driver of our Civic lives in Ontario, we can assume the average cost of car insurance is $1,920 annually, or $160 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.

Click here to read our guide to car depreciation.

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 it or trade it in down the road.

  • The annual depreciation cost of our Civic is $1,975.

Car ownership cost annually

After adding all of those costs together, the annual total cost of owning our Civic, including deprecation, would be $10,880 per year, or $907 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 $8,880, or $740 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.

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.

Compare car loans

Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements Table description
Loans Canada Car Loans
$500 - $35,000
0% - 29.99%
3 - 96 months
300
Min. income of $1,800 /month, 3+ months employed
Compare rates from multiple lenders.
Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered.
goPeer Car Loan
$1,000 - $25,000
8.00% - 31.00%
36 - 60 months
600
Min. income of $40,000 /year
P2P platform with competitive rates.
Canada's first regulated consumer peer-to-peer lending platform that connects creditworthy Canadians looking for a loan with Canadians looking to invest.
AutoLoanProviders
$7,500 - $85,000
3.99% - 29.99%
12 - 96 months
300
Min. income of $1,800 /month, 1+ months employed
Available in Ontario only.
Apply online and get your new vehicle delivered to your door anywhere in Ontario free of charge. All credit scores considered.
CarsFast Car Loans
$500 - $75,000
4.90% - 29.90%
12 - 96 months
300
Min. income of $1,800 /month, 3+ months employed
Get a new or used vehicle delivered to your door.
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs.
Coast Capital Car Loan
$10,000 - No Max.
Varies
18 - 84 months
650
Able to service debt payment of $300/month
Competitive rates and flexible terms.
Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.
Splash Auto Finance
$10,000 - $50,000
9.90% - 29.90%
24 - 84 months
300
Min. income of $2,200 /month, 3+ months employed
Apply with any credit score.
Get financing for a new or used car. Auto loans for borrowers with fair credit, bad credit, no credit or bankruptcy.
LoanConnect Car Loans
$500 - $50,000
9.90% - 46.96%
3 - 120 months
550
No min. income requirement
Pre-approval in as little as 60 seconds.
Get access to 25+ lenders through this brokerage. Get your funds in as little as 24 hours.
Canada Auto Finance
$500 - $45,000
4.90% - 29.95%
3 - 96 months
300
Min. income of $1,500 /month, 3+ months employed
Get financing from partnered local lenders.
Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
Carloans411 Car Loans
$500 - $50,000
1.90% - 19.99%
Up to 72 months
300
Min. income of $1,600 /month, 3+ months employed
High application approval rate.
Get connected with suitable lenders to finance your next car, van or truck. Check eligibility for this loan through LoanConnect.
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Compare up to 4 providers

How can I calculate the cost of car ownership?

The easiest way to calculate the cost of owning a specific new or new-to-you car on your own is to use online resources like the CAA Driving Cost Calculator. This calculator gives you a yearly estimate for different makes and models based on a 5-year long loan or lease. You can use CAA’s calculator to estimate how much your car will cost annually here. It takes 5 factors into consideration – alongside depreciation – to give you an idea of the cost of owning a car in Canada.

Bottom line

A car can cost tens of thousands of dollars over the course of 5 years. Using sites like the CAA Driving Cost Calculator, in addition to our guides listed above, to create a yearly budget can help you pick a car you’re able to afford in both the short and long term.

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.

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