Think you know how much it actually costs to own a car?
While most people realize basic vehicle costs such as buying, insurance and maintenance, two thirds of Canadians have no idea about the true costs of car ownership.
According to the Canadian Automobile Association, owning a car costs an average of $9,000 per year per vehicle.
This amount includes several short and long term costs that can come as an unpleasant surprise.
So what is the total cost of car ownership?
When calculating the true cost of car ownership, you’ll need to include – obviously – the amount it cost you to buy the car.
But beware – you can’t simply look at the price tag of your vehicle.
Instead, you’ll need to calculate the cost of your loan – including your auto loan interest rate.
After you figure out how much you’re actually paying for the car, you’ll need to add insurance costs.
You’ll also need to calculate cost of maintenance, fuel, licence, registration – and don’t forget the taxes.
This list goes on, and can include one time, monthly or annual payments, which can be pretty hard to track.
Another thing you’ll need to factor in when working out the cost of your car is to calculate depreciation.
Depreciation sounds complicated, but the concept basically refers to the amount in value your car decreases after you buy it.
Considering many people are plan on eventually selling or trading in their used cars, it’s very important to keep this cost in mind.
According to the CAA, a vehicle’s value drops on average 30 per cent in the first year of ownership and between 60 to 70 per cent within five years.
This means if you bought a car for $10,000 it might well be worth only $2,000 when you try and sell it.
What is your car costing you?
While we’ve mentioned the general costs incurred by every Canadian car owner, it’s important to remember that not everyone uses a vehicle to the same extent and for the same function.
For example, consider two vehicle owners who have the same vehicle and pay the same insurance.
However, while owner A uses the car every day, owner B views it more as a status symbol, and living in a city, most often walks or uses the metro to beat the traffic.
So while they both have the same basic costs attached, owner A pays a lot for fuel, and due to heavy usage, their car has depreciated faster – and will sell for less – than owner B’s virtually unused used car.
This example shows that no two person’s car costs will be exactly the same.
To calculate your true costs of car ownership, track your monthly payment (including your car loan interest rate calculations), as well as your monthly auto expenses to total up all the costs.
If you have cash back auto loans, don’t forget to subtract the cash back from your total monthly car costs.
Start calculating your car costs today, and save yourself from unexpected expenses and unpleasant surprises in the future.