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The real cost of owning a car

Betty C. Morrow October 6, 2021 9 min read

Table of Contents

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  • The real cost of owning a car
  • Big City parking: $473
  • Sales tax on new car: up to 15 per cent
  • Car maintenance: up to $1,500
  • Traffic tickets: up to $10,000
  • Proposed tax on luxury vehicles: 10 per cent
  • Documentation fee: up to $1,600
  • Gas: up to $2,098 per year
  • Vehicle registration fee: up to $340 in Newfoundland and Labrador
  • Dealer fees: up to $4,000
  • Set of tires: $300 to $5,000 (or more)
  • Set of winter tires: $800 to $1,500 (with rims)
  • Average cost of car insurance: from $717 to $1,832 per year
  • Average insurance rates: 4.5 to 6 per cent
  • Costs of fatal car crash: more than $225,000
  • Depreciation of a car’s value: 10 per cent in first month
  • Premium for buying new vs. used cars: $178,000 over lifetime
  • Roadside assistance: $60 to $150 per year
  • Higher cost of leasing: $29,212 (example)
  • Markup on extended warranties: up to 100 per cent
  • Highest auto loan rate: 20.11 per cent
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The real cost of owning a car
















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The real cost of owning a car

It’s enough to drive you crazy. Cars almost always are more expensive than we imagine. On average it costs $3,300 to own and operate a compact, gas-powered car—a number that 20 per cent of Canadians underestimate by $1,000 or more.

With hidden dealer costs, the rising price of insurance and gas, the money needed to park in the big city, repairs, and the rest of this depressingly long list on the real cost of owning a car—walking or riding a bike might seem like a more attractive alternative.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Big City parking: $473

Paying for parking is a big part of a car’s costs, especially in a big city. Surprisingly, the title for the most expensive place to park isn’t Toronto, Vancouver or Montreal but Calgary. In fact, its average median parking rate of $473 is second only to New York in North America.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Sales tax on new car: up to 15 per cent

Paying sales taxes can be especially painful for a major purchase such as a new car. Depending on the province you live in, they can be as high as 15 per cent. If you decide to buy a car out of province, in, say, Alberta, where there is no provincial sales tax, keep in mind you still have to figure out how to get the car home if you are going to register it where you live. Should you transfer the title and registration to your home province, this will cost you between $80 and $150.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Car maintenance: up to $1,500

What you need to budget for car maintenance—oil changes, tire rotations, transmission fluid services, and timing belt replacements, for example—varies according to how much you drive, how well you want to care for the vehicle and its age. On average, expect to shell out $1,400 to $1,500 a year.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Traffic tickets: up to $10,000

When people buy a car, especially a sporty one, they don’t usually take into account the tickets and associated fines they might get, which can also affect their insurance rates as demerit points add up. In Ontario, for example, if you are caught going more than 50 km/h over the posted speed limit, you could face a $10,000 fine, roadside licence suspension and seizure of your vehicle.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Proposed tax on luxury vehicles: 10 per cent

Prime Minister Justin Trudeau’s Liberals promised in 2019 to levy a 10 per cent luxury tax on vehicles worth more than $100,000, affecting about 30,000 car sales across the country. Car dealers, predictably, were not happy with the prospect. “It would gravely affect our business,” claimed Pfaff Automotive Partners CEO Chris Pfaff.




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Documentation fee: up to $1,600

After a car sale has been negotiated, new car owners are often surprised to find unexpected charges on their invoice, including documentation fees. Dealerships claim it is for filling out paperwork. In British Columbia, documentation fees usually run at around $300 but can balloon as high as $1,600. Legally the only required fees in this province are sales taxes, a battery levy of $5 and a tire levy of $3 to $5 per tire.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Gas: up to $2,098 per year

Unless you drive an electric or hybrid vehicle, you can expect to pay a lot for fuel. In Ontario, the province with the highest gas expenses, the average annual cost is $2,098, taking into account more than 15,000 km of driving and a fuel economy of 9.8 litres per 100 km. The type of car you drive also has an impact. For example, it could cost about $3,000 a year to fill up a Jeep Liberty.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Vehicle registration fee: up to $340 in Newfoundland and Labrador

Registration fees for vehicles vary from province to province, with different costs to register cars, to get new licence plates or renewal stickers and for frills such as vanity plates. In Newfoundland and Labrador, for example, there is an annual vehicle registration fee of $180 and a renewal may cost $160. Replacement of licence stickers is $30.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Dealer fees: up to $4,000

Car buyers are often victims of sticker shock, discovering that dealers tack on fees that seriously bump up the price tag. There might be charges for shipping, dealer prep, to recoup advertising costs, and so on. Road and Travel Magazine say dealer costs can boost the car price by as much as US$3,000.

“Unexpected costs at dealerships can really upset car-buyers, and can even be a deal breaker if the fees put the car above the buyer’s financial limit,” says Philip Reed, co-author of Strategies for Smart Car Buyers. “Early in the shopping process, consumers should ask dealerships about the fees they charge and take that into account as they negotiate.”




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Set of tires: $300 to $5,000 (or more)

Costs for new car tires vary according to brand, style and tire size. TireBuyer.com pegs the range for inexpensive tires at US$50 to $150 each, moderately priced ones from $100 to $300 each and high-end ones $300 to $1,000 each.

Warns the site: “Remember that as with many products, with tires, you get what you pay for. Paying a bit more can get you a higher-quality tire that may last longer and feel better on the road.”




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Set of winter tires: $800 to $1,500 (with rims)

If you live somewhere where there is real winter (most of Canada), you may need a separate set of winter tires to keep from skidding on cold and icy roads. These tires have sharp edges to bite the road and are made of a rubber compound that stays soft in cold temperatures. The average cost for a set of four winter tires for a midsize car with rims is $300 to $1,500. Average costs are $80 to $200 per tire (and can go much higher for high-performance tires).




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Average cost of car insurance: from $717 to $1,832 per year

When calculating the costs to own a car you must add your insurance premiums, which have been rising across the country. Average amounts vary from $717 in Quebec to $1,832 in British Columbia. In B.C. rates have gone up an eye-watering 63 per cent over five years. One reason that Quebec has low premiums is that it has imposed limits on bodily injury claims.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Average insurance rates: 4.5 to 6 per cent

For the average car loan you can expect to pay 4.5 to 6 per cent interest, depending on whether the vehicle is new or used and if the interest rate is fixed or variable. If you have a mediocre or poor credit rating, your insurance rates can get jacked up. So someone with a good credit score could wind up paying about $4,767 interest on a brand new $36,000 car, with a $3,600 down payment. With a bad rating, this could rise to more than $23,000.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Costs of fatal car crash: more than $225,000

Fatal car accidents are not just costly to the unfortunate participants but to society as a whole. The Collision Cost Study undertaken by the Capital Region Intersection Safety Partnership breaks the tolls down into direct costs, “human capital costs” and willingness to pay costs, and determined that a single fatal car crash exacts a final bill of $225,000—only $14,000 of this on average involving property damage.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Depreciation of a car’s value: 10 per cent in first month

Carfax points out that if you want a new car worth $40,000 in your driveway, you better buy one with a sticker price of $45,000. After you drive a car off the lot, it depreciates in value by 10 per cent in the first month. By the end of the first year, the depreciation number rises to 20 per cent and then 10 per cent every year after that, depending on how much you drive the vehicle, how well you maintain it and other factors.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Premium for buying new vs. used cars: $178,000 over lifetime

The National Automobile Dealers Association claims that the average person owns 13 cars in a lifetime, each costing an average of US$30,000. If each of those vehicles were three years old, instead of new, you could save almost US$130,000 during your life. New cars depreciate faster than used ones.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Roadside assistance: $60 to $150 per year

Since the average Canadian vehicle travels about 15,400 km a year, and some of this in harsh weather conditions, it’s a good idea to have a roadside assistance plan. Car associations, clubs and retailers, such as the Canadian Automobile Association and Canadian Tire, offer plans ranging from $60 to $150 annually.

You can also get assistance plans from car manufacturers such as Ford and GM (often bundled in with the price of the car), financial institutions and credit card companies. For $120 a year, for example, the TD Cash Back Infinite provides deluxe auto club membership.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Higher cost of leasing: $29,212 (example)

The economic benefits of buying a new or used car vs. leasing are complicated to map out and depend on your particular deal and requirements. Edmunds does a side-by-side comparison (in U.S. dollars) of the average costs to finance a new and used car, and the average leased cost, and determines that the total out-of-pocket financing cost is highest for buying new ($32,830).

However, this doesn’t take into account the greater loss of car equity when you come to the end of a lease, and have to start a new lease-or-buy cycle. So the final costs with equity, in descending order, are leasing ($29,412), buying new ($22,430) and buying used ($18,388).




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Markup on extended warranties: up to 100 per cent

An extended warranty, or an aftermarket car warranty, is an option you can buy to cover expensive vehicle repairs after the standard manufacturer’s warranty expires. They range from bumper-to-bumper to powertrain, to performance warranties.

The Automobile Protection Association points out: “Dealers will rarely negotiate the price of an extended warranty. New car dealers typically mark up their manufacturer’s warranty by 25%-30%. Both new and used car dealers mark up third party warranties 50%-100%, and sometimes even more.”




Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Highest auto loan rate: 20.11 per cent

Unless you are independently wealthy, you are not going to buy your car outright. The financing you get may be the second-most expensive part of obtaining your vehicle. Shaving off a few percentage points can save you thousands of dollars in payments.

The interest rate you pay depends largely on your credit rating. So someone with a top credit score could get, say, a new car loan for 5 per cent. However, someone with a credit rating in the basement could pay as much as 16 per cent, making life and their car hard to afford.




Microsoft and partners may be compensated if you purchase something through recommended links in this article.


21/21 SLIDES









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