A vehicle is a necessity for most Canadians, but it’s a costly one, coming in only behind housing and groceries as the third largest household expense, according to a new financial comparison report.
The biggest expense for many vehicle owners is the monthly auto loan payment, which is around the $1,000 mark for an eight-year term on a new car, Ratehub said. Those looking to buy a used vehicle and who put some money down can reduce the monthly payment to about $765.
The high monthly payments reflect the increased cost of owning both new and used vehicles. Ratehub said the cost of a new vehicle has increased 19.4 percent year-over-year, while used vehicles have increased a more modest 4.3 percent over the previous year.
Ratehub’s calculations estimate that vehicles depreciate about 10 percent a year, which works out to about $592 each month. This amount was included in the total cost of car ownership.
The average cost of gasoline each month can vary based on different car models and how far vehicle owners travel. For the study, Ratehub estimated a cost of between $180 and $224 for gas each month, based on the national average gas price of $1.38/litre.
Car maintenance is the next cost that vehicle owners need to consider. The report author recommends putting aside $79 each month for maintenance costs. It’s also advisable to consider a different vehicle once maintenance costs top $1,000 each year.
Licence plates and registration were estimated at $79 per month, and average auto insurance costs each month were $111, but can be higher depending on location, age, and driving record.
Monthly parking costs can also contribute to the expense of having a vehicle. The researcher estimates about $200 per month for
Adding up all these expenses shows that owning a car costs about $16,664 per year, or $1,387 each month.
To save money when buying a car, consider buying used rather than new and choosing smaller vehicles that are fuel efficient, the report suggests. Putting more money toward a down payment can reduce monthly costs, as can shopping around for car insurance and taking the vehicle to local mechanics for maintenance rather than the dealership.
A survey by Leger on behalf of car-sharing company Turo found that one quarter of car owners said monthly expenses were a main reason for selling their vehicles.
“Given how integral vehicles are to our ability to work, explore, and perform everyday tasks, it’s understandable that many feel it would be impossible to go without one despite increasing financial pressures and low usage rates,” said Turo Canada senior vice-president Cedric Mathieu.
The survey polled approximately 1,500 Canadians between Jan. 8 and 19, 2023.
Financial Struggles
Pollara Strategic Insights’ annual economic outlook found that 52 percent of Canadians surveyed said they anticipate the country’s economy to worsen in 2024. About a quarter said they don’t expect any changes to the economy and 15 percent remained optimistic that it will improve.
The survey also found that 46 percent expected to fall behind financially in 2024, while eight percent expected to do better. Thirty-eight percent said they didn’t expect to see a change in their financial situation.
Food pricing and housing were among the biggest concerns expressed by Canadians.
