What is the total cost of ownership for a car?

This post was originally published on January 1, 2020, and was updated on January 30, 2024.

Are you tired of lugging groceries home and taking public transit? If you’re thinking about buying a car, you should first understand the total cost of owning one.

According to Statistics Canada, shelter is our largest household expense at 31.4%. And while the cost of food has recently overtaken second place, transportation is in a close third, accounting for 15% of household spending. The cost of car ownership can be more expensive than you might think so we thought we’d make it easy on you and break it all down.

What is the cost of your car payment or lease?

According to data from Autotrader, the average selling price of a new car was $67,817 as of September 2023 – an increase of +19.4% YoY. Combined with October 2023 data from Statistics Canada, which shows the average APR on new auto loans has skyrocketed to 8.19%, the average brand-new car costs somewhere around $1,091 per month to finance over an eight-year term.

Assuming you’ve got at least some money for a down payment, expect your monthly cost to be lower. Paying enough upfront to cover the tax on an average new car brings the payment down to “only” $965 per month. 

While recent supply chain issues have limited the amount you can save by buying used, the price of used cars is staying relatively flat compared with the rapid rise in MSRP figures. Autotrader says the average used car price is up just +4.3% since last year, and currently sits at $39,155. Since interest rates on used car financing tend to be higher (around 10% to 12% for those with good credit) and repayment terms tend to be closer to six years, the payment on an average used car is likely to be around $765 per month.

Note: Autotrader's Price Index report has since been updated with the latest data from December 2023 – check out the newest insights to stay informed about the latest market trends and pricing information.

Whether you go with the average used car or a cheaper-than-average new car, let’s assume $800 per month for this analysis. Over the course of an eight-year loan, an average of $195 of each payment is devoted to interest.

Also, keep in mind that the monthly payments to lease may be lower, so check out our leasing vs. buying a car guide to determine if leasing is an option for you.

What is the average cost of depreciation? 

While most people see their car payment as an expense, it’s actually only the interest portion of your payment that costs you money. The rest repays a loan and is used to build equity in your car, much like you build equity in your home by paying off your mortgage.

Unfortunately, a car is a depreciating asset, and depreciation actually costs more than your car payment – even while used car prices remain sky-high.

To investigate depreciation in 2024, let’s investigate a vehicle commonly available for close to the average new vehicle price of $67,817: a 2023 Ford F-150 XLT. At the time of writing, 146 are listed on Autotrader in Canada within the range of $67,000 to $68,000.

After two years, 2021 comparable models are selling for a range of $32,000 to $55,000 – a depreciation of $12,500 to $35,500 or 19% to 53% of their original sale price.

Comparable five-year-old trucks range in asking price from $32,000 to $39,000 – a total depreciation over five years of around $35,500 or 53%. After five years, your new vehicle will have lost an average of $7,100 or 10.6% per year. That works out to $592 per month.

What is the average cost of gas per month?

The fuel consumption of vehicles ranges widely, from the electric Hyundai Ioniq 6 which uses the equivalent of just 1.7 litres of gasoline per 100 km travelled, to the audacious Bugatti Chiron Pur Sport which sucks down 26.1 litres per 100 km.

For the purposes of this article, we’ll look at a popular choice for Canadian families, the Toyota RAV4. This best-selling SUV uses an estimated 7.9 litres per 100 km. 

While data on how far Canadians drive since the pandemic is hard to find, Natural Resources Canada uses an estimate of 20,000 km per year for its Fuel Consumption Guide. That works out to 385 km per week, which feels right for a daily round-trip commute of 40 to 50 km plus some driving to get groceries, visit your parents, or take your dog to the vet.

These estimates work out to 132 litres of fuel consumption per month. At the current national average gas price of $1.387/litre, your new Toyota RAV4 will burn $183 per month in gas. Based on 2023’s peak average price of $1.696/litre, you’re looking at up to $224 per month for fuel. 

The cost of fuel can be much lower if you drive an electric vehicle. Canada’s most popular all-electric vehicle, the Tesla Model Y, is officially rated to use 17.2 kWh per 100 km travelled. Whereas the cost of hydro in Canada ranges from roughly 8c to 19c per kWh, a similar electric car would cost only $23 to $54 per month to power.

What is the average cost of car maintenance?

Statistics Canada says the average Canadian household spends $79 per month to maintain and repair vehicles, but that figure can vary drastically depending on your car.

If you buy a new car, you won’t have to worry much about repairs while it’s under warranty – typically at least the first three years or 60,000 km. During that time, your primary maintenance expense will be oil changes, at a cost of about $120 every three to six months. There will also be occasional extra expenses like fluid changes and brake repairs.

Once your car is out of warranty, you should set aside at least $100 per month in maintenance costs. This allowance should cover you for routine lube, oil, and filter changes, tire rotations, and enough money saved for any unexpected repairs.

A rule of thumb: If you start to spend more than $1,000 per year on maintenance, it’s time to start thinking about buying a new (used) car. You should think about taking the maintenance money and investing it into a TFSA or high-interest savings account to afford your next vehicle purchase.

What about car administrative fees?

The cost of registering and licensing your car varies by province and ranges from $60 to $200 per year.

If you live in Ontario, you will need to pay a $32 licensing fee to register a new (or new-to-you) car, plus $59 if you require a license plate, but there is no fee for annual renewals as of March 2022. Ontario’s emission testing requirements for older cars were cancelled as of April 1, 2019.

How much do you spend on parking?

If you live outside of a major centre, parking may not be much of a consideration. But if you live or work in a big city, it can be a major expense.

There are no recent statistics on parking costs in Canada, but a quick spot check with parking company Impark shows that spaces go for a range of $200 to $300 per month in Vancouver and Montreal, $200 to $400 in Toronto, and $200 to $500 or more in Calgary.

Your own parking expense will vary, but for this analysis, we’ll estimate $200 per month, which could be particularly low or high depending on where you keep your car when you’re not using it.

What is the average cost of car insurance?

A 2022 report commissioned by the Insurance Corporation of British Columbia (ICBC), while flawed, gives good insight into how much Canadians pay for car insurance based on their driving history.

For example, the report shows that a 40-year-old woman who had been licensed since age 16 and drives a 2017 Ford Escape would pay an average of $1,049 for BC car insurance, $1,895 for Alberta car insurance, and $1,509 for Ontario car insurance. It also shows a woman 10 years younger with a recent at-fault crash and a 2019 Ford F350 would pay $2,065 in BC, $4,839 in Alberta, and $3,501 in Ontario. The study excluded car insurance in Quebec, which is the cheapest in Canada. 

Of all Canadians, Ontarians pay the highest insurance premiums. The average policy now costs $1,796 per year, according to the Ontario government. Rural Ontarians pay much less, averaging $1,404, while GTA drivers pay much more, averaging $2,391 for Toronto car insurance.

A weighted average using data from the website CanadaDrives.ca reveals that Canadians can expect to pay approximately $1,337 per year for car insurance, or $111 per month, depending on where they live.

What is the total cost of ownership for a car?

Across Canada, the total cost of ownership for a car is approximately $1,387 per month when you include all your car payments, gas, maintenance, and auto insurance costs.

How to save money when you buy a car

• Consider buying a used car to reduce the hidden expense of depreciation
• Choose a car that’s smaller, more fuel-efficient, and more affordable
• Consider using ride-sharing or public transportation instead of buying a second car
• Increase the size of your down payment to reduce monthly payments and reduce the cost of borrowing
• Finance your car over a shorter term to save money on interest, or over a longer term to reduce monthly payments
• Save on routine maintenance like oil changes using local mechanics rather than the dealership
• Compare car insurance quotes online to get the best deal for your needs
• Bundle your car and home insurance together for a potential 10 to 15% in savings

You can also offset the cost of owning a car by using your car to make extra income. Rent out your vehicle using Turo car rental or start driving for Uber or Lyft to make some money with your car – just make sure you have ride-share insurance in place.

Is it worth the cost of owning a car?

A reliable vehicle is a non-optional expense for many Canadians. Many of us live in places where public transit is an afterthought, and it’s not exactly feasible to rely on taxis or ride-sharing to get kids to activities. It’s also difficult to make longer trips, like visiting family a few hours down the road or getting to a weekend getaway, without a car.

Depending on your needs, however, it could be entirely reasonable to choose to own one car instead of two – or go without. In areas where public transportation is relatively quick and reliable, going car-less makes sense. For the $1,387 we estimate it costs to own a car, a family of four can get unlimited travel on the TTC for as little as $286 per month. That leaves over $1,000 for Ubers and occasional car rentals.

The bottom line

Owning a car is becoming more expensive in Canada, and each vehicle now costs us an average of $1,387 per month. Save on your car expenses by choosing a more affordable option, using alternative transportation when possible, and getting the best deal on car insurance by comparing quotes online.

Also read

• Inflation and your car insurance – what you need to know
• How to get the cheapest car insurance in Canada
• The best-selling cars in Canada