The true cost of vehicle ownership—how much to budget for a car

Canada Life - May 01, 2022
Whatever way you choose to acquire a vehicle, it’s important to stay within your budget; whether that’s for a down payment or for financing

Whether you need to purchase a car to commute to the office or you’re tired of balancing bags of groceries while you wait for an Uber, it’s important to consider the true cost of owning a vehicle. In 2019, the average Canadian household spent $11,258 on private transportation, with half being spent on purchasing or leasing a vehicle and the other half on operating costs. While car ownership brings convenience and comfort, there are additional expenses beyond the purchase price. In 2019, the average Canadian household spent $5,707 on overall vehicle operating costs, like maintenance, gas, insurance and registration.

Types of vehicle-related costs

Car payments 

Whether you choose to buy new, used or lease a vehicle, you’ll need to establish a budget. For most people, buying a car is the most expensive purchase they’ll make (aside from buying a house). The average Canadian household spends 18.5% of their overall budget on transportation.

Before you buy, take time to research the year, make and model of a vehicle through consumer websites and consult reviews. You’ll find out which cars tend to need more maintenance and the scope of repairs some need. As well, you’ll learn more about fuel mileage, tire size and other things related to operation costs later on.

New cars come with a warranty but depreciate quickly in value. If you choose to buy new, consult current used car ads to understand vehicle depreciation patterns and what you may sell your vehicle for in the future. Changing vehicles brings more costs, so it’s best to keep your car as long as possible.

Used cars are lower in initial price but may come with an unknown history and may need more frequent repairs. If you are buying a used car from a family member and know the vehicle history, you may save some money in the long term. There are also services that will allow you to view a vehicle’s history – a dealership should offer this to you to review before you buy.

Leased cars boast convenience but come with a high monthly price — and you’ll need to return the car at the end of the leasing period. This option is more costly because it’s comparable to renting a car for a specified period and the lease payments don’t allow you to establish equity the way car ownership does.

Whatever way you choose to acquire a vehicle, it’s important to stay within your budget; whether that’s for a down payment or for financing. Shop around for financing deals, choose reputable companies and read contracts carefully before signing. You can also consult a car cost calculator for an estimate of how this purchase will affect your budget.


Are you wondering how much to budget for car maintenance? According to CAA, the average car maintenance cost for is about $500 to $700 per year, excluding tires.

In addition to oil changes at the manufacturer’s recommended interval, you should also budget for unforeseen repairs. Car parts typically come with a warranty, but the warranty is for the part itself and doesn’t include the mechanic’s labour fee.


Along with keeping your air filter clean and your tires balanced, there are other ways to maximize fuel efficiency. You can save on your gas usage in what you drive (lighter, smaller car models get higher gas efficiency) and also in how you drive (avoid frequent, rapid acceleration, minimize air conditioning usage and keep your tire pressure in the recommended range). Use cruise control to maintain a consistent speed on highways and check what your vehicle’s optimum highway speed is for gas efficiency. Gas is often priced lower on weekday evenings. Try using an app to save money by finding the lowest price.


The variety of available insurance options mean it’s important to shop around. If you have a loan on your vehicle—often referred to as a lien—your lender will require you to carry collision insurance. This means if you have an accident, the insurance company will pay to repair your car, regardless of who was at fault in the accident. If you don’t have a loan against your vehicle, you can save money by not carrying collision insurance, although it’s wise to keep enough money in your savings account to pay to repair your vehicle if necessary. You can sometimes get a lower overall premium if you increase your deductible, but ensure your deductible is affordable. You may also save money by bundling car insurance with home or tenants’ insurance. Lastly, a clean driving record means lower insurance premiums, so be sure to follow the rules of the road.


Your province or territory’s Transportation Ministry charges annual fees to renew your licence plate sticker. You may also be subject to a green fee or emissions testing, so consult your local authority to know what these costs are ahead of time.

Tips to reduce car expenses

  • Insurance is not a lifetime contract—don’t be afraid to shop around on an ongoing basis. Many insurance companies offer discounts for groups like alumni of post-secondary institutions, teachers or workers in specific trades. You can also ask about discounts for snow tires or locking an anti-theft device on your steering wheel.
  • Don’t skip on car maintenance—failure to keep your car in good working order can result in significant damage to your car at an unexpected time. After factoring in towing costs, repair costs, and rental costs, it will be cheaper to keep your car maintained than to fix it.
  • Check fluid levels—buy a jug of windshield wiper fluid on sale and store in your car to save you from an emergency purchase of an expensive gas station jug.
  • Keep learning—by reading the owner’s manual or taking a car maintenance course, you can learn how to do basic maintenance yourself.
  • Play it safe—driving defensively with visibility, space and communication is not only an important way to ensure your safety and others’ safety, but it lowers your insurance and reduces your gas consumption.

You may ultimately decide to postpone vehicle ownership and instead use public transportation or borrow a car from others when needed. As long as you’ve done your research, you can feel confident that whatever decision you make is the right one for you.

Contact me today to learn more.