This article has been updated from a previous version
It’s no secret: owning a car is expensive. Some people prefer to go without one for that very reason.
But how much does it actually cost to own a car?
Well, in addition to the purchase price, there’s also the expense of insurance, gas, maintenance and repairs, parking, and licensing fees. And these costs will vary depending on which province you live in.
If you’re wondering about car ownership costs in Canada and how much you might have to spend to get behind the wheel, here’s what you need to know.
Buying a new car
How much does the average new car cost?
The average cost of a car depends on several factors, including:
- Vehicle type
- Down payment amount
- Terms of your loan (duration and interest rate)
In December 2021, the average price of a new car surpassed $50,000, marking a 12.7% increase from the year prior. The leading cause is a shortage of semiconductors, the computer chips used in cars that control everything from engine timing and cabin temperature to infotainment systems.
Because of COVID-19, car manufacturers had to close their plants and dial back the number of new cars they produced, leading to another factor driving up the price of new vehicles — low inventory. Coupled with inflation and high demand from former commuters who don’t want to take public transport due to the pandemic, prices will likely continue to go up.
Monthly car payment
Unless you can pay cash for your new vehicle, you’ll need to apply for some form of financing. The car dealership may require a down payment or a co-signer to improve your chances of approval.
You can either finance your vehicle via the dealership — meaning you own the car and make regular payments to the lender — or you can lease your car, where you effectively “rent” the vehicle for a determined length of time (anywhere from two to five years) and make regular payments until it’s time to return it.
If you take out a car loan, your monthly payments will be determined by the size of the loan, the interest rate, and the length of the term. The amount you pay each month will be lower if you take out a loan with a longer repayment term. But keep in mind that you’ll wind up paying more interest if you do this.
As an example, let’s consider the 2022 four-door Honda Civic Sedan EX, the most popular vehicle in 2021. We used the Honda finance payment calculator to determine the monthly financing costs for this vehicle, which has a manufacturer’s suggested retail price (MSRP) of $27,770. Financing rates vary from dealership to dealership. At Honda, a 60-month (or five-year) term comes at an interest rate of 4.19%. Taking that into consideration, as well as the recommended 10% down payment of $2,777, this means our monthly car payment works out to $454.55. Note that this does not include cost freight, PDI, sales taxes, or other levies and fees.
Every province and territory has its own rules regarding the minimum quantity of insurance drivers must purchase to operate a vehicle legally. However, if you’re financing or leasing your car, your lender may require you to get more coverage (like collision coverage and comprehensive coverage). That’s because they want to safeguard the underlying value of the vehicle if you have a collision and your car is totalled.
Generally speaking, a new car will almost always be more expensive to insure because it is worth more right now.
Insurance companies consider many factors, including your age, commute, address, and driving record, to determine the cost of your premium. These providers also consider the make, model, horsepower rating, year of manufacture, and safety features of your car. So choose wisely.
We looked at data from the LowestRates.ca car insurance quoter to determine what it would cost to insure a 2022 Honda Civic Sedan EX as a 30-year-old male driver in Toronto with a clean driving record and insurance history. Our total monthly payment, including both financing and insurance costs, works out to be $641.13.
Rates are expected to continue increasing, which is why it’s essential to shop around for the lowest rate and focus on premium-affecting factors that are within your control, such as your driving behaviour. Ultimately, whether your car is new or used, the higher the risk you are as a driver, the more you’ll pay in insurance.
Canada’s gas prices continue to climb as the country maintains its reopening status and people begin to travel more. Not to mention the shortage of oil supply that’s been pushing gas prices since the start of the Russia-Ukraine war. As of April 6, the national daily average for regular gas was 173.8 cents per litre.
Your monthly gas expenditures will be determined by your vehicle’s fuel efficiency, an estimate of the number of kilometres you travel each year, and an estimate of gas prices.
Luckily there are tools online you can use to find the most fuel-efficient car. For instance, with Natural Resources Canada’s tool, you can examine the fuel consumption data of various models to choose a more fuel-efficient vehicle. You can also save money by using apps like GasBuddy to help you find the cheapest gas near you.
Maintenance and repairs
Another ongoing cost of owning a car is maintenance.
A new car typically comes with a warranty. Check to see what’s covered and how much you’ll save if something goes wrong during the warranty period. When purchasing the car, you may be able to buy an extended warranty. This is an additional investment up front, but it will save you money in the long run on repairs and upkeep.
However, you’ll still need to set aside money for scheduled and unscheduled maintenance costs. As a personal finance rule, you should also have enough money saved for any unexpected car-related expenses.
According to CAA, routine scheduled maintenance can cost anywhere between $500 and $700 per year, depending on how many kilometres you drive. This does not include tire replacement or winter tire purchases, which can cost up to $1,500 including tax for popular vehicles.
While winter tires are recommended across Canada, they are required only in Quebec and British Columbia. Even though you don’t have to buy new winter tires every year, you should consider the cost of tires and the cost of having them switched from season to season. The good news for Ontario drivers? Having winter tires will earn you a discount of up to 5% on your car insurance.
Lastly, we can’t talk about total ownership costs for new cars without talking about depreciation. The moment you drive a new car off the lot, it begins to depreciate. Average estimates for the first year might be as high as 23.5%, depending on the region and the vehicle model. This is why many people decide to buy used instead.
Buying a used car
What is the average cost of a used car?
Unfortunately, the used car market faces supply issues, which are driving up how much it costs to own a used car. Fewer new cars to sell means fewer trade-in opportunities, and, as a result, the supply of used vehicles has slowed to a crawl. However, generally speaking, used cars are less expensive than new vehicles. The fact that they don’t lose their worth as quickly as new cars is possibly their biggest selling feature.
You can buy a used car from a dealership, but this isn’t the only option. You can also purchase used automobiles privately through websites like Kijiji and Facebook Marketplace. If you’re buying used, you may not have to make monthly payments on the vehicle if it’s significantly cheaper, and you can buy it outright.
Insurance costs tend to be cheaper for used cars, especially if their parts are less technologically advanced. (This makes them less expensive to replace.) A 2006 Toyota Corolla CE 4DR, for example, placed sixth on our list of the cheapest cars to insure in 2021. In total, it costs 25.94% less to insure than the national average premium.
Keep in mind that frequently stolen cars are considered a higher risk to insure, whereas vehicles with a low theft rating have cheaper insurance rates. Keep an eye on IBC’s annual Top 10 Stolen Vehicles list to get a sense of which vehicles might yield higher rates due to how frequently they’re stolen.
Gas prices are no different if you’re driving a new versus a used car.
One thing to keep in mind about gas is that prices typically rise as the summer approaches due to increased driving activity. In addition, summer blends are more expensive to produce than winter ones, which results in higher gas prices at the pumps from May through September. Apart from increased demand and seasonal changes, a few other things influence the cost of gas, such as weather conditions, geopolitical conflict, the status of oil and gas reserves, refining capacity, and the value of the U.S. dollar.
You also have to consider whether your car requires premium or supreme gas, which costs more than regular gas. For instance, as of April 6, premium unleaded gasoline at self-service filling stations cost Canadians 197.3 cents per litre, compared with regular gas at 173.8 cents per litre.
You can use the same tools we mentioned in the new car section above to find the most fuel-efficient vehicle.
Maintenance and repairs
One of the downsides of purchasing a used car is that the maintenance costs can be much higher due to increased wear and tear. Chips, scratches, and rust repairs are examples of bodywork not caused by a collision that you may need to pay for out of pocket. These are modest fixes, but they can pile up over time, especially if the car has been around for several years.
Don’t forget to factor in getting regular car washes, either. Keeping your car clean can increase its overall life span, especially if you live where salt is used to prevent ice from forming on the roads. Corrosion and rust can be dangerous to your car’s health; therefore, you should often wash and inspect your vehicle’s underbelly.
In some provinces, a car that is more than 10 years old must first pass an inspection before receiving new insurance. This can be done at any repair shop for a few hundred dollars.
Other costs that come with owning a car
Whether your car is new or used, you need to factor in other costs, such as:
- Licensing fees. If you’re a new driver, you will need to get your licence to drive legally in Canada. These costs vary depending on the province you live in. While it’s a small one-time expense, don’t forget to include it in your overall budget.
- Administrative fees. Depending on your location, some administrative fees may be included in your overall car ownership costs. Fortunately, the cost to renew your licence plate sticker, which was once mandatory in Ontario, has been done away with as of March 13, 2022. However, some other provinces, like Nova Scotia, still enforce sticker renewal fees every one to two years.
- Parking fees. You may have a laneway or garage if you own a home, but if not, you may need to park on the street. In large cities, street parking is sometimes the only option. For instance, parking typically costs $17.21/month + HST in Toronto for a residential on-street parking permit if you do not have access to on-site parking.
Where you park can also affect the cost of your car insurance. For instance, an insurance provider would compare the risks of parking your car on the street (damage, theft) to parking it in a laneway or garage and adjust your premium accordingly. If you have access to private parking, you might be eligible for a discount so ask your insurance broker.
So, how much does it cost to buy a car? As you can see, it depends. If you’re in the market for a vehicle, whether it’s brand new or used, you must add up the total cost of car ownership as it relates to your lifestyle before purchasing. A little research and smart shopping can save you hundreds, if not thousands, of dollars.
Methodology for determining insurance rate
- 2022 Honda Civic Sedan EX (financed)
- Private driveway
- Drives five kilometres to and from work daily (10,000 kilometres annually)
- Winter tires
- Personal use
- Lives in the M6H 1X1 postal code of Toronto, Ont.
- Collision and comprehensive coverage
- 30-year-old male, single, employed
- G licence
- Has been with the current insurance company for two years
- Listed on an insurance policy since 2008
- Did not opt for any discounts related to telematics or bundling
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About the author
Zandile is a freelance personal finance journalist. She previously worked as a personal finance writer at LowestRates.ca and before that, the content editor for Real Estate Management Industry News. As a self-proclaimed budget warrior, Zandile dedicates most of her time to advocating for financial wellness.