More than the sticker price
A car’s purchase price is only the beginning. The total cost of ownership includes everything you spend over the years you own it.
Costs of owning a vehicle
| Cost | Type | Notes |
|---|---|---|
| Purchase (or financing) | upfront | plus taxes and fees |
| Depreciation | ownership | often the largest cost |
| Insurance | operating | depends on age, driving record, location |
| Fuel | operating | depends on distance and fuel efficiency |
| Maintenance and repairs | operating | oil changes, tires, brakes |
| Licence and registration | yearly | |
| Parking, tolls | operating |
Fuel costs
Canada measures fuel efficiency in L/100 km.
Fuel cost = (km driven ÷ 100) × L/100 km × price per litre
Example: 15,000 km/year, 8 L/100 km, $1.60/L.
150 × 8 × 1.60 = $1,920/year
Depreciation
New cars often lose roughly 15–25% of their value in the first year and continue to lose value each year after.
Example: A $30,000 car losing 15% per year:
V = 30,000(0.85)ᵗ → after 5 years ≈ $13,311
Depreciation over 5 years ≈ $16,689.
Cost per kilometre
Cost per kilometre = total yearly cost ÷ km driven.
Example yearly costs:
| Item | Cost |
|---|---|
| Depreciation | $3,300 |
| Insurance | $1,800 |
| Fuel | $1,920 |
| Maintenance | $900 |
| Registration | $120 |
| Total | $8,040 |
$8,040 ÷ 15,000 km ≈ $0.54 per km
Buying vs leasing
| Buying | Leasing |
|---|---|
| you own it | you’re renting it long-term |
| higher payments if financed | lower monthly payments |
| no km limits | km limits; fees for extra km |
| build value over time | return the car at the end |
Alternatives
Compare with transit passes, cycling, car-sharing and occasional rentals. In many cities, not owning a car can save thousands per year.
Electric vs gas
EVs typically cost more upfront but less to fuel and maintain. Compare total cost over several years, not just the price.
Worked examples
Example 1: 12,000 km at 6.5 L/100 km and $1.55/L? 120 × 6.5 × 1.55 = $1,209.
Example 2: A $25,000 car loses 20% in year 1. Value? $20,000.
Example 3: Yearly costs $6,000 for 10,000 km. Cost per km? $0.60.
Common mistakes
- Considering only the monthly payment.
- Forgetting depreciation, the hidden biggest cost.
- Mixing up L/100 km and km/L.
Try it yourself
- Fuel cost for 20,000 km at 9 L/100 km and $1.70/L?
- A $40,000 car depreciates 15% per year. Value after 3 years?
- Total yearly costs $7,200; 18,000 km. Cost per km?
- Name two operating costs.
Answers: 1) $3,060 2) ≈ $24,565 3) $0.40/km 4) e.g. fuel, insurance
Quick recap
- Total cost of ownership includes depreciation and operating costs.
- Fuel cost uses fuel efficiency in L/100 km.
- Compare buying, leasing and alternatives by cost per kilometre.