The True Cost of Car Ownership: Fuel, Insurance, Maintenance and Depreciation

A cheaper purchase price can lead to a more expensive car. The useful comparison is what each vehicle will cost over the years you expect to drive it.

A car’s price is settled on the day you buy it. The cost of owning it takes years to reveal itself.

Loan payments and fuel bills are easy to notice. Expenses such as tires arrive in batches. Depreciation can pass unnoticed until you ask what the car is worth.

Adding those costs can change which vehicle looks like the better buy. A more expensive model might use less fuel or retain more value. Higher insurance could wipe out part of that advantage.

The aim is to build a comparison you can explain, with firm prices where they exist and honest assumptions where they do not.

Start with the years and kilometres

Choose the period you actually expect to keep the vehicle. Five years is a useful example, but it is not a recommendation. Someone who replaces a car every three years faces a different calculation from someone who keeps it for ten.

Estimate annual distance from your commute, errands and longer trips. Check past service records or odometer readings.

Use the same period and distance for every candidate. Comparing a five-year purchase with a three-year lease leaves two years of transportation out of the lease column. Comparing different annual distances can make a thirsty vehicle appear more economical simply because you have assumed it will do less work.

Separate the monthly budget from the ownership cost

Two calculations answer different questions.

Cash flow tells you when money leaves your account: the initial payment, monthly loan or lease payments, insurance, fuel and other bills. It determines whether the vehicle fits your household budget.

Ownership cost measures what you spend over a chosen period after allowing for the vehicle’s remaining value. For a purchase, the basic calculation is:

Purchase price, including applicable taxes and purchase fees + borrowing costs + operating costs − net resale value = ownership cost.

Here, net resale value means the expected selling price after selling expenses, but before paying off any remaining vehicle loan.

Do not add every loan payment to depreciation. A loan payment includes principal, which pays for the vehicle itself. Counting the full purchase price, all loan payments and depreciation would count much of the same cost repeatedly.

If you prefer to track cash paid, use the alternative: upfront money, including contributed trade equity, plus loan payments made during the period, plus the outstanding loan payoff and operating costs, minus net sale proceeds. Include applicable payoff charges. Do not deduct the loan balance from resale proceeds and add it again elsewhere.

Dividing ownership cost by the number of months gives a useful monthly average. It is not your monthly payment, and it does not tell you how much cash you need on delivery day.

Depreciation deserves its own line

Subtract eventual net resale value from your actual purchase price, including taxes and fees. This captures depreciation and unrecovered purchase charges. Comparing today’s sticker price with a future dealer asking price misses part of the cost.

A used-car advertisement shows what a seller hopes to receive. It does not establish what a dealer will pay you, or what a private buyer will ultimately offer.

Build the resale assumption from comparable vehicles with similar age, kilometres, condition and equipment. Keep the sales channel consistent: a private-sale estimate for one vehicle and a trade offer for another can distort the result.

Future resale remains an estimate. A lease residual is a contractual figure used in the lease calculation; it is not a promise that you could sell the vehicle for that amount. Show the ownership result with a lower resale value as well as your main assumption.

Estimate fuel from your own driving

Natural Resources Canada’s fuel consumption ratings tool lets buyers compare models and personalise cost estimates using annual kilometres, city driving and energy prices. Match the engine, transmission and drivetrain to the vehicle you intend to buy.

For a gasoline vehicle, the calculation is straightforward:

Annual kilometres ÷ 100 × litres per 100 km × price per litre = annual fuel cost.

At an assumed 20,000 km a year, 8.0 L/100 km and $1.60 per litre, fuel would cost $2,560 annually, or about $213 a month. Those are illustrative inputs, not a current fuel-price forecast.

Use the grade of fuel the manufacturer specifies and adjust the estimate if your driving is unusually demanding. An advertised consumption figure cannot account for every winter commute, towing trip or traffic delay.

For an electric vehicle, price the electricity you expect to buy at home and at public chargers separately. Include an installation quote if you need home charging equipment. Check whether the consumption measure already accounts for charging losses before adding another allowance. For a plug-in hybrid, estimate both the distance you can regularly cover on electricity and the gasoline needed for the rest.

Get an insurance quote for each vehicle

Insurance is too specific to the driver and vehicle to treat a national average as a reliable quote. Ontario’s Financial Services Regulatory Authority identifies the vehicle, location, driving record, annual distance, coverage and deductibles among the factors that affect premiums.

Ask your insurer or broker to quote the exact vehicles on your shortlist using the same drivers, address, use, coverage and deductibles. If one price is lower because it removes protection, it is not a like-for-like saving.

Record the quoted premium and its date. Treating it as fixed for five years is an assumption. Leave room for changes when checking affordability.

Budget for maintenance even under warranty

Open the manufacturer’s service schedule for the exact model. List the scheduled work likely to fall within your ownership period, then ask for local prices. Check both time and distance intervals, plus any conditions that call for more frequent servicing.

Keep scheduled maintenance separate from repairs and tire costs. A warranty does not mean every service, worn part or future repair will be paid for.

The difference between time and distance coverage matters. Toyota Canada, for example, lists basic coverage of 36 months or 60,000 km, whichever comes first. A driver travelling 25,000 km annually would reach that distance in about 29 months. Other components and manufacturers have different terms.

Read the actual warranty and any prepaid maintenance agreement before reducing your budget. If a service plan is already included in the purchase price, do not count its price again. Budget only for the work it does not cover.

Include winter tires if needed, suitable wheels if you intend to buy them, seasonal changes, storage and replacement tires. Price the size fitted to the trim you want. Also add parking, tolls, applicable licensing charges and any subscriptions you plan to keep.

A monthly maintenance reserve smooths out irregular bills. For ownership-cost calculations, estimate the expense itself. Money still sitting in your savings account at the end of five years is not a repair cost.

A five-year comparison that changes the apparent winner

Consider two hypothetical vehicles bought with cash and driven 20,000 km annually for five years. Every figure below is invented to demonstrate the method. These are not quotations, Canadian averages or predictions for particular models.

Car A costs $38,000 including purchase taxes and fees. Car B costs $44,000 on the same basis. Assume gasoline stays at $1.60 per litre, Car A uses 9.0 L/100 km and Car B uses 5.5 L/100 km. All other estimates are shown in the table.

Car B costs $6,000 more to buy but $2,100 less to own under these assumptions. Its fuel savings outweigh the extra acquisition and insurance costs.

Neither monthly average is a bill. Both buyers paid cash upfront. These figures spread the net cost across the ownership period, including the assumed value recovered at the end.

The example uses undiscounted dollars, holds operating prices constant and excludes borrowing costs, forgone investment returns and exceptional events. Financing either vehicle would require adding its actual borrowing cost. A more detailed comparison could also account for the timing of payments and money retained in savings, using explicit assumptions rather than promised investment returns.

Test what could change the result

The apparent winner depends on the inputs.

If Car B sells for $15,000 instead of $19,000, its total rises to $59,000. Car A becomes cheaper by $1,900, assuming everything else stays the same.

If annual driving falls to 10,000 km, Car A’s five-year fuel bill drops to $7,200 and Car B’s to $4,400. Holding every other line unchanged, ownership costs become $49,900 and $50,600 respectively. Car A is now cheaper by $700.

That second test isolates fuel. In a full revision, lower kilometres could also affect maintenance, insurance and resale. Its purpose is to show why the amount you drive can change the value of paying more for efficiency.

Test the assumptions most capable of changing your decision: resale, distance, energy prices and large insurance or repair allowances.

Give leases an equivalent comparison

For a lease you plan to return, count the upfront non-refundable amounts, all payments including tax, operating costs and applicable return charges. Count the first payment once if it is collected upfront. Do not also add purchase depreciation or subtract the vehicle’s resale value.

Use the contract’s kilometre allowance and return requirements. GM Financial’s Canadian lease-end guidance, for example, sets out condition checks covering bodywork, tires and missing equipment, alongside the agreement’s kilometre allowance. Your own lessor’s contract governs your obligations.

If you intend to buy the leased vehicle, add the purchase-option amount, applicable taxes and fees, and any buyout borrowing costs. Then include the remaining operating period and subtract the vehicle’s estimated net resale value at your chosen endpoint.

A four-year lease cannot stand in for five years of transportation without a stated plan for year five. A future replacement lease needs a separate assumption; today’s promotional payment is not a guaranteed future offer.

Use the result to narrow your shortlist

Keep a record of where each number came from. Dealer prices, insurance quotes and service estimates should carry dates. Fuel prices, annual distance and future resale should be visible assumptions. The CAA Driving Costs Calculator can provide another comparison, but check its inputs before treating its result as your own.

Before Your Next Car can help you compare available purchase and payment options. Add the costs tied to your own driving and circumstances before deciding which vehicle offers better value.

A small predicted saving should not outweigh a car that fails to fit your family, commute or parking space. When costs are close, acknowledge the uncertainty. When the gap is substantial and survives realistic changes to the assumptions, you have a stronger reason to prefer one option.

Sources checked October 9, 2026. Numerical examples are illustrative. Confirm current prices, eligibility and the rules applicable to your transaction.