How much does it cost to take ownership of a car?

Tyler WadeJanuary 1, 2020Are you tired of lugging groceries home and taking public transit? If youre thinking about buying a car, you should first understand the total cost of owni

How much does it cost to take ownership of a car?
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Tyler WadeJanuary 1, 2020

Are you tired of lugging groceries home and taking public transit? If youre 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 29.2%. If you thought food costs came 2nd, know that transportation costs are 6.5% more as second-largest expenditure category, accounting for19.9% of total consumption. The cost of car ownership can be expensive, more than you might think. We thought wed make it easy on you and broke it all down.

First, know the cost of car ownership can vary between provinces.The price to buy the car can fluctuate based on supply and just getting the car to the dealership. There are also regional differences in gas prices, accessories like winter tires, maintenance, administrative fees, parking, and car insurance.

So, for clarity, well use Ontario as an example to understand the total cost of ownership for a car. We need to look at both the cost to own and operate a car. Now, to ride public transit roundtrip in Toronto (TTC), every working day, and sometimes on weekends, itll cost you about $150/month. If you can walk or bike to work, you can save even more.

Heres a rough breakdown of the cost of ownership for a car.


Lets break this down so it all makes sense.

What is the cost of your car payment or lease?

Depending on how much you put down and how long your term of lease or finance will determine the price you pay per month. Financial experts say you should put down at least 20% of the purchase price. If you lease, the same experts say 3 years is best, you can stretch to 4, but no more than 5 years.

Since this is likely your first car, well look at thecheapest car in Ontario, the Chevrolet Spark, starting at about $16,000. You put 20%, or $3,200 towards the car for your downpayment, and because youre financially savvy, you finance for 3 years at a special introductory offer (O.A.C) of 0.99% annual interest rate. Your monthly payments are $420 for the next 3 years.

However, since a car depreciates the minute you drive it off the lot, its a good idea to buy used. Buying a 3-year-old car can save you a lot of money. If you buy the Spark used, say a 2015 model, you can save around $2,000. I did a quick check on a used version of the Spark, and it saved about $75 on your monthly car premium.

Lets buy the used car, and our new monthly car payment is $350.

Note: The monthly payments to lease are less, but read our leasing vs. buying a car post to determine the best course of action for your situation.Car finance payments: $350/month

What is the average cost of gas per month?

How many kilometres does it take to drive to and from work? Lets say its a 20km round trip. Lets add in an additional 100km per month to get groceries, visit your parents, or take your dog to the vet.

The Chevy Spark with automatic transmission uses 6.7 litres for every 100km driven with a 35 Litre tank capacity.

Using the Natural Resources Canada websitefor gas prices and average fuel consumption, they tell us well spend an average of $1,742 on gas every year with the Spark, or $145 per month. Be sure to adjust this price for your own car and geographic differences in fuel costs.

Again, if youre cycling, walking, or taking transit  you can save money.Gas cost: $145/month

What is the average cost of car maintenance?

If you buy a new car, it usually includes a warranty. If so, you dont have to worry too much about maintaining the car. You can probably handle oil changes with cash flow at about $80 every 3 months. Once youre out of warranty, you should set aside $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, its 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.Maintenance cost: $100/month

What about car administrative fees?

Again, because this can vary in each city and province, were sticking with Ontario as our example.

Ontario used to charge for a drive clean, or emissions test on older cars but it will be cancelled as of April 1, 2019.

In Southern Ontario, it costs you $120 to renew your license plate sticker every year.Car administrative fees: $10/month

How much do you spend on parking in a year?

If you have a driveway, its usually free to park in it. In Toronto, it costs $16 per month for a street parking permit. Around Toronto, parking lots, garages, and metered street parking will range in price depending on proximity to services. For instance, youll pay more to park near a hospital or sporting event than you will in a residential neighbourhood.

For arguments sake, lets say you spend about $50 per month on parking. This number could fluctuate if you park at work for $5 to $25 a day or if you need to rent out an underground parking space in your condo from another owner. Make sure to do your math correctly.Parking cost: $50

Are you paying the best price for car insurance?

Compare personalized car insurance quotes from Canada's top providers for free!show me how

What is the average cost of Ontario car insurance?

The average Ontario car insurance policy in 2017 was $1,458 per year, according to the Ontario government. Of all the provinces in the country, Ontarians pay the highest average insurance premiums.

But Its tricky to give you an absolute number here because many factors are used to determine your car insurance rate. An auto insurance provider will look at your age, sex, neighbourhood, make and model of the vehicle and your driving record to name a few.

To simplify, were going to use our Toyota Yaris Hatchback example paired with a 30-year-old female living in Toronto. I used the car insurance quoter to find you the best Ontario car insurance quotes from many providers in minutes. I got a few different quotes, but well average it out to $300 per month. Yes, way more than the average but we have not factored any discounts, like loyalty, memberships, or bundling into the price.Car insurance: $300/month

What is the total cost of ownership for a car?Finance payments$350Gas$145Maintenance$100Car administrative fees$10Parking fees$50Car insurance$300GRAND TOTAL$955/month (or $11,460 annually)

The total cost of ownership for a car is $955 per month when you include all your car payments, gas, maintenance, and auto insurance costs. After 3 years, youve paid for your car in full, and your payments drop to $502 per month.

Experts recommend that your car expenses should not exceed 15% to 20% of your monthly take-home pay. In our scenario, this means that our 30-year-old female driving a 2015 Chevrolet Spark in Toronto, Ontario would need to be making about $68,000 after tax or about $93,000 in annual salary. You can figure out your net take-home pay on or

I compared these results using the CAA driving costs calculator which gives rough estimates on many cars. When I put in our scenario from this article, it calculated the cost at about $7,000 per year, or about $4,000 less. However, they halved maintenance costs, they estimated both the insurance and the financing at 30% less, and it doesnt include any parking fees.

How to save money when you buy a car

  • Extend the term of financing to 5 years, and your monthly payment drops to $223
  • Get one of the best gas credit cards in Canadathat earns 4% cashback: $40.32
  • Cut maintenance costs to $20 a month (oil changes)
  • Administrative fees: $10
  • Only park in driveways and find free parking elsewhere: $0
  • Bundle car with home insurance can save 10-15%  $255
  • New total monthly cost is $548.32

(This is closer to the CAA costs and now you can see the possible differences.)

You can also save money buying an older car. Take the time to shop for more auto insurance quotes. You can even rent out your vehicle using Turo car rental or start driving for Uber or Lyftto make some money with your car.

Alternatively, all these costs may be even more. For instance, a big road trip will cost more in gas and parking. Think about how much it might cost you not to maintain your vehicle or be underinsured after an accident.

Visit Ratehub.cas car buying guide: How to buy a car

Is it worth the cost of owning a car?

As a real-life scenario, my wife and I bought a new-to-us used car last year. We saved up, had a car trade-in, and so we pay $0 per month for our car in terms of financing or leasing. The car is paid off. We dont use the car that much, so our gas costs are minimal. Our car is still under warranty, so we arent setting much aside for maintenance. She walks to work, and I take public transit. Weve been loyal to our car insurance provider for over 10 years, have clean records, and take advantage of membership discounts and bundled it with our home insurance to save even more. Our annual cost of car ownership is just over $4,000 per year and about $350 per month. We justified the expense.

In a different case altogether, neighbourhood friends of ours, with 3 kids, decided to try living without a car. They rent a car for road trips, they buy groceries online and use Ubers more often. They wanted to try it, and so far they show no signs of stopping, yet. Their combined salary allows them to afford a car, but, just like you, owning a car is a choice.

To take a page from my parents, owning a car is a privilege, not a right. At, we aim to help you make smarter financial decisions.


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