License plate for success

6 considerations to make when determining the cost of car ownership

It's hard to put a firm dollar value on car ownership. Unlike most other types of commercial purchases, cars demand an ongoing influx of funds. Some of that can be mitigated by large initial payments and responsible care, but the financial burden is never totally lifted.

The best you can do is to prepare yourself as extensively as possible. Understand the full scope of car ownership and be ready for those obligations when they arise. Otherwise, you could be biting off more than you can chew.

1) Financing

Unless you're prepared to cover the full cost of a car at the time of purchase—and the majority of buyers are not—the price you end up paying for it will be more than the one on the price tag. Just how high it climbs depends on what kind of a financing agreement you are able to carve out with a dealership, bank, or alternative lender.

Before you step onto the lot to buy a car, you should have a good idea of what kind of a down payment you're willing to make and what kind of APR value or loan term you're willing to agree to. It will be those things that determine the true cost of a car purchase—not the amount you see written in giant numbers on a cardboard cut-out vying for your attention.

2) Registration and renewal

Registering and renewing your vehicle is a relatively minor cost compared to other aspects of car ownership, but it's still significant enough to be thought of as a legitimate consideration. It's a process whose specifics will differ from province to province, but for the most part, it's largely similar across Canada.

In Ontario, registration for all vehicles costs $32. Unfortunately, that's not where the costs end. Getting a new or replacement license plate with a permit—a mandatory expense—is $57. And since a license plate sticker is only valid for a year, that must be renewed on an annual basis for either $60 or $120, depending on which part of the province Ontarians live in.

3) Insurance

There's no driving without insurance. It's required by law everywhere in Canada; however, depending on where you are—and who you are—its costs could differ greatly.

In fact, based on data from 2013, the average Ontarian was paying $1,456 annually for auto insurance while the average Quebecer was paying just $715. That's a major disparity, and certainly one worth investigating before pulling the trigger on a car purchase.

Other insurance-related factors to keep in mind when considering how much a car will cost you is your demographic, your discount eligibility, and your driving history. Being a young male driver is going to be far worse from a cost standpoint than being a middle-aged person with a clean record on the roads; just as someone who bundles products or vehicles with an insurer will save compared to someone who doesn't.

4) Gas

Gas is a highly circumstantial car ownership cost. Commuters will obviously be spending far more than people who only use their car on weekends (unless those weekends constantly feature lengthy road trips).

For argument's sake, let's say that a driver would be using approximately a tank a week. These days, that's likely to cost somewhere between $60-$70 per fill up. Over the course of a year that would amount to around $3,120-$3,640. That amount could certainly go down if you're being smart about gas purchases by using an app like GasBuddy, but either way, be prepared to be spending quite a bit on gas.

5) Maintenance

A car is no use if it's condition is too rough to drive in. That's why maintenance is a key consideration for any prospective car owner to be making.

Owners should constantly be looking out for things like tire pressure, oil changes, light functionality, and all the other aspects of car maintenance that need to be addressed with regularity. In a year where things go smoothly, one could get away with paying only a hundred dollars or so on maintenance (that floor will be slightly higher in places where snow tires are a necessity). But if things are constantly going wrong—engine troubles, dents and scratches, etc.—then watch out; maintenance bills could easily skyrocket towards $1,000 and beyond.

6) Depreciation

A lot of people buy cars with the expectation that they can at least get some re-compensation if they eventually want to get rid of them. While this is generally accurate, a lot of those people often end up being disappointed at how meager that re-compensation is.

The moment a car leaves the lot it depreciates enormously in value. Once an owner has gotten months or years of use out of it, that value sinks even further. So no one should go into a car purchase expecting to eventually get great value for it down the line. It is not the same as a house in that sense.