WHAT DOES IT COST TO OWN A CAR IN CANADA? A LOT
Price tag on everything auto-related keeps climbing, writes Lorraine Sommerfeld.
Whoever said what goes up must come down sure wasn't talking about the cost of owning a car in Canada. That is more like up, up and away.
With the price tag on everything associated with car ownership reaching nosebleed levels, Ratehub has ascertained that on average, Canadians are looking at spending about $1,300 a month to own and maintain a vehicle.
The average cost of a new car in Canada in 2023, according to Autotrader, rose to $67,817, an increase of nearly 20 per cent over 2022. That does not mean you can't find a cheaper car, but it does mean that you're paying more than ever. Tack on average interest rate charges that have climbed over eight per cent, and the fact those rates on used vehicles are typically higher still, and the halcyon days of almost free credit are long behind us. Ratehub used $800 as a monthly payment for this breakdown, with $195 of that going to interest over an eight-year term.
WHAT ARE THE MONTHLY COSTS?
Depreciation takes a huge bite: before you make your purchase, check out your prospective vehicle's anticipated hit with something like Canadian Black Book's annual retained value listings. Spoiler alert: buy a Honda, a Toyota or a Porsche. Ratehub's illustration uses the popular 2023 Ford F-150 XLT. Starting with an average cost today around $67,000 to $68,000, it's hitting that average new car cost right on the nose. But keep reading: the 2021 version of the same model is selling for between $32,000 and $55,000. That's quite a spread, but it still shows depreciation of between 19 and 53 per cent of the original cost. When it moves into the five-year-old range for that truck, “your new vehicle will have lost an average of $7,100 or 10.6 per cent per year. That works out to $592 per month.”
Not everyone buys a car looking to sell it, and depreciation is an acceptable part of the deal for many who recognize a car is expensive, though highly unlikely to be an appreciating investment. But circumstances can change, and if your hand is forced and you must sell, or replace, that depreciation will become a major factor.
Look into gap insurance when you purchase your new vehicle. A total writeoff doesn't guarantee you get what you might owe on your car loan, only what the car is worth. There are products that span that difference. While in recent years values have been inflated due to shortages in the supply chain, making some vehicles previously of dubious worth punch far above their pre-pandemic weight, the fact remains, you could end up holding the bag if you've overextended yourself on a car loan, or gone underwater by rolling a previous loan into the new one. With so few escape hatches in the system, at least take the ones you can.
The survey also delves into average maintenance costs for Canadians. With new cars under warranty, maintenance is not much of a factor. Ratehub reports that Canadians average $79 a month on repairs — again, little of this will be in the initial years — but also suggests you count on $100 a month as the car ages. They suggest if you're spending more than $1,000 per year on maintenance, it's time to think of replacing the vehicle. A trusted technician can help you make that decision.
The survey looked into costs like car registration and admin fees which vary by province, but generally work out to about $10 a month, with some provinces like Ontario waiving licence renewals. Parking costs will also fluctuate depending on your circumstances, but they found $200 a month to be average.
Fuel costs can also vary depending on the type of vehicle you drive. Ratehub considered the ever-popular Toyota RAV4, 2023 average and peak fuel costs, and the Canadian government's current Fuel Consumption Guide. At an average 7.9 litres per 100 kilometres, an owner driving 20,000 km per year would spend $183 in gas monthly at $1.387 a litre, or $224 per month when 2023 prices hit their peak average of $1.696 per litre. Flip side, if you own an electric vehicle, you already know the substantial savings on fuel. Ratehub looked at the Tesla Model Y, “officially rated to use 17.2 kwh per 100 km travelled ... the cost of hydro in Canada ranges from roughly 8c to 19c per kwh a similar electric car would cost only $23 to $54 monthly to power.”
Insurance for many Canadians is a nightmare, and while $111 monthly might be an average for this exercise, many Canadians, most notably in Ontario where rates are highest, would welcome such a sweet deal.
“The average policy now costs $1,796 per year ... rural Ontarians pay much less ($1,404) while GTA drivers pay much more ($2,391),” from the report. They include other scenarios across various provinces, but for Hannah Yarkony, who insures two vehicles with her husband while living in Brampton, Ont., that high cost is bang-on. She just got her renewal and it had jumped to $4,600 per year for two seasoned drivers who both work from home.
WHAT IF YOUR CAR GETS STOLEN?
You can't talk about insurance without addressing the huge impact that auto theft is having on the industry. Ontario and Quebec are hot spots, but nowhere is immune. Paying out those theft costs has raised all of our rates, but be cautious which vehicle you are considering buying: some insurance companies are affixing a surcharge to cars that thieves prefer, or requiring additional aftermarket anti-theft devices in an effort to stop the bleeding.
Matt Hands, vice-president of insurance for Ratehub, points out another way that insurance costs are delivering a hit: the increasing complexity of repairing modern vehicles. “Windshields used to be a pretty straightforward repair. Now with all the sensors and tech loaded in, those costs have gone into the thousands.”
As costs continue to escalate, Hands notes, “all that tech is increasing the costs to buy vehicles as well as the cost to repair them.”
Insurance is very individualistic (where you live, how you drive, your claims history) but he thinks many of us also look to the past for things we took for granted — like those basic windshields.
How much car you buy, current interest rates, where you live, how frequently you drive — all of these things will define your actual cost of ownership. Ratehub has brought in a national yearly average of $16,644.
And it's only going up.