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Understanding the Greatest Cost of Car Ownership

Recently, Canadian Black Book (CBB), in conjunction with Ipsos Reid, conducted a survey they called, "Drivers of Automotive Values Poll." In this survey, they asked 1,004 drivers from across the country what they thought the greatest cost of car ownership is. And 90 per cent of respondents answered incorrectly.

What do you think the most expensive part of vehicle ownership is? If you are thinking fuel, maintenance or insurance, you would be like most Canadians. And you would be incorrect. It turns out that depreciation will cost you the most money over the course of car ownership.

How Depreciation Makes Car Ownership Expensive

From the CBB survey, these were the answers given when consumers were asked, "What do you think is the greatest cost of vehicle ownership is?"

  • Insurance: 33%
  • Gas/Fuel: 29%
  • Maintenance: 24%
  • Don't Know: 6%
  • Vehicle Payments: 3%
  • Registration: 1%
  • Taxes: 1%
  • Other: 1%
  • Depreciation: 1%

CBB was concerned about the poll results because they reflect a lack of consumer awareness. New car sales have been up, and buyers have been accepting loans with longer terms to keep their payments low. However, CBB believes that the results of "Drivers of Automotive Values Poll" may inspire consumers to make better decisions.

To illustrate the considerable depreciation expense that comes with a new car purchase, Canadian Black Book provides an example. They point out that if you purchase a vehicle with an MSRP of $40,000, this car's value could drop by as much as $16,000 in the first year of ownership. So, you would end up "paying" around $44 a day in depreciation costs.

cost of car ownership

When asked about the apparent lack of awareness where vehicle depreciation is concerned, Brian Murphy, a Vice President with CBB, stated:

"That one answer tells us clearly that there is a disconnect, a perceived information gap where most buyers of new cars seem to be making the wrong assumptions on the types of expenses that have the greatest impact on the actual cost of owning a vehicle."

In the same study, it was revealed that approximately 50 per cent of those surveyed are "likely" to purchase a car within the next 18 months.

Putting This Information Together

This CBB study offers some valuable insights for anyone who intends to purchase a vehicle in the near future. It appears that having the right information can save you a lot of money and problems down the road. So, if you are thinking about buying a car, it will be helpful to be aware of the following:

  • New cars lose value quickly. For some buyers, a new car purchase makes sense. Just make sure that you understand the cost of depreciation before taking the plunge. Also, if you find that you need to finance a new car for 72 months in order to keep the payments affordable, you maybe should rethink your decision.
  • Used vehicles are more budget-friendly. A pre-owned car is less expensive to buy, but the savings don't end with the purchase price. In the example provided by CBB, a $40,000 new car "costs" around $44 a day in depreciation. However, they go on to reveal that after the first couple of years, depreciation costs come down to around $10 a day.
  • Car value resources are available. If you have a vehicle to trade in, you don't have to blindly trust the dealer to give you a fair price. You can easily consult several other online sources to get an idea of what your vehicle is worth before heading out to the dealership.

As an informed consumer, you can confidently purchase a vehicle that fits your needs and budget. You will also be more likely to get a good deal on your trade-in.

Useful Financing Information

If you are dealing with credit issues, your top car buying concern may be an auto loan approval. And it is true that there are limited financing resources available for buyers with damaged credit. However, Canada Auto Loan can help by connecting you with a dealership that is qualified to work with your situation.

Only certain dealers are associated with lenders that are willing and able to approve buyers with less than perfect credit, and we can match you with one. And because we have dealerships throughout the country, you won't have to go far to get financed and back on the road.

Our process is fast, our service is free, and you won't be obligated to buy anything when you apply. So, go ahead and fill out our simple and secure online application to get started today.