What are your major routine expenses? After rent or mortgage payments, most people tend to say groceries. But for most Canadians, the second-biggest monthly expense is transport.
Transport costs generally account for 20 per cent of after-tax income for a middle-class household, according to Scott Hannah, who heads the B.C.-based Credit Counselling Society. And that’s because many Canadians can’t live without a car.
If you include depreciation, owning your own vehicle costs between $8,600 and $13,000 a year, close to the $11,940 that Canadians pay on average in rent for a two-bedroom apartment.
In rural communities the transport share of people’s budget easily climbs even higher, said Hannah. If you regularly drive on snowy country roads, not only do you need a car, but “you can’t be driving a beater.”
Most drivers know their vehicle’s ticket price, but far fewer have a grasp of just how much it costs them every year to drive their car or truck, said Kristine D’Arbelles of the Canadian Automobile Association (CAA). That’s a big blind spot for such a large chunk of money.
Here’s what the average cost of owning different types of vehicles looks like:
If you’d like to come up with a more precise cost estimate tailored to your ride and commute, you can use CAA’s calculator or do some back-of-the-envelope math. Here’s a list of what you should consider:
If you already own a vehicle, you know what your premium is.
If you’re looking to buy a car, it’s a bit trickier. Not only will your insurance cost vary based on the type of vehicle you choose and your driving record. Your address also matters.
It’s well known that the cost of auto insurance varies considerably from province to province. But prices can also swing significantly from neighbourhood to neighbourhood within the same city. Annual premiums in the Greater Toronto Area, for example, ranged from $1,640 to $2,595 a year in 2016, according to Kanetix.ca.
It pays to explore your options, either through an online auto insurance comparison site or by speaking to a broker.
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If you’re like the average Canadian, the dollars you drop at the pump every year will be your biggest vehicle ownership cost after depreciation (more on that later), according to D’Arbelles. The average pickup truck, for example, guzzles around $3,000 worth of gas a year, she added.
In order to do the math, you need three numbers: the fuel efficiency of your vehicle, an estimate of how many kilometres you travel every year, and an estimate of gas prices.
For a pretty good idea of your fuel efficiency, check out the fuel consumption ratings compiled by Natural Resources Canada, suggested D’Arbelles. They provide estimates of fuel consumption on city streets, highways, as well as a combination of both.
For an estimate of kilometers travelled, you can measure your daily commute or weekly driving distance. But most people will also need to account for things like Christmas and summer travel. Canadians tend to cover 20,000 kilometres a year, said D’Arbelles.
For gas prices, use the previous year’s gas price daily average and add a few cents, just to be safe, D’Arbelles suggested.
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Licencing and registration fees
These vary by province, but don’t forget to add them up.
This is one people often forget about, said D’Arbelles. But oil and tire changes and “all the little things” that go into keeping your vehicle in shape usually add up to between $500 and $700 a year, she noted. That’s the average spend for the first five years, D’Arbelles added. After year five, your vehicle’s upkeep can become considerably more expensive.
Those maintenance costs don’t include the price tag for brand new winter tires. Buying your initial set costs between $800 and $1,500 for popular vehicles, according to Driving.ca.
Car owners who live or work in larger cities often face parking costs as well. In Toronto a year’s worth of on-street residential parking permits can cost, roughly, between $185 and $650, plus tax. In Vancouver’s West End neighbourhood, residents are now looking at up to $360 a year for a year’s worth of on-street parking.
This is the one only car-finance nerds will have in their budget. It’s the difference between what you paid for your vehicle and its trade-in value. New vehicles shed 10 per cent of their value as soon as you drive them off the lot, said D’Arbelles. Generally, depreciation is steepest during the first year but slows down considerably between year two and six, according to car shopping website Edmunds.
Although few keep tabs on it, depreciation is usually the biggest cost of vehicle ownership, according to D’Arbelles.
To say that riding public transport is cheaper isn’t a revelation. But when you do the math, the cost difference is mind-boggling. A year’s worth of adult monthly public transport passes costs around $940 on average in Canada, according to Global News calculations based on data from the Canadian Urban Transit Association (CUTA).
That’s just over 10 per cent of the cost owning the cheapest kind of car.
Using public transit exclusively isn’t a realistic option for many people and many life situations, acknowledged Patrick Leclerc, president and chief executive of CUTA.
But the numbers might give pause to families weighing the pros and cons of owning a second car, he added.
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Cars are bleeding Canadians dry, but that may be about to change.
Concern for the environment, rising car ownership costs and an aging population, among other things, are nudging more and more Canadians toward using public transit, CUTA found in a recent report.
Even in the suburbs, “car is not (entirely) king … anymore,” the paper notes.
But technology is also blurring the line between drivers and riders, with car-sharing and self-driving vehicles likely to turn cars into just another piece of the transport network, said Leclerc.
With fully autonomous vehicles possibly becoming a reality as early as 2021, automakers are thinking they’ll increasingly be selling “mobility services” rather than cars in the future. Think of a subscription service for vehicles that will stop at your door and take you wherever you need to be, rather than your own vehicle waiting for you in your home garage.
In Helsinki, Finland’s capital, residents are already able to pay for all kinds of public and private transport — from buses and taxis to bikeshares — using a single app called Whim. The city is aiming to make private car ownership superfluous by 2025.
Such an integrated approach to city transport has countless potential benefits. But it might be a boon for your wallet, too, and not just because it might make getting around less expensive.
If Canadians were able to use an app to pay for all their transport needs, they’d be much more likely to know exactly how much it’s costing them, said Leclerc.
© 2017 Global News, a division of Corus Entertainment Inc.