Are the costs of owning a car worth it for students?

Has there ever been a time when you and your roommates struggled to carry grocery bags home from the store on public transit? Did you ever impulsively feel like going back to your hometown to see your family and friends, but had difficulties finding a convenient ride? Was there a part-time job that you wanted to work but couldn’t manage due to the distance and time constraints without a personal vehicle?

For many students, the thought of owning a car can be extremely desirable because of the convenience and freedom it can grant you—but what if you knew how much the car would cost you each year?

As a student who has owned a sturdy 2003 Honda Accord for the last three years, I’ve learned how important it is to have a good understanding of the costs associated with car ownership, and how to weigh the pros and cons to decide if it’s a worthwhile investment or not.

How expensive can car ownership be?

According to Statistics Canada, the second largest expense for the average Canadian household is transportation. Yet, at the same time, a survey conducted by the Canadian Automobile Association (CAA) in 2018 showed that 67% of Canadians don’t know how much car ownership costs each year (answer: it averages $9,000). Would you still consider owning a car to be a feasible and convenient investment if you had to spend that amount?

Kristine D’Arbelles, senior manager of public affairs for CAA, says there’s significant financial risk that comes with owning a vehicle, but a lot of it will depend on your situation, lifestyle and money management.

The primary reason students struggle with debt, according to Ted Michalos, a Licensed Insolvency Trustee and co-founder of Hoyes, Michalos & Associates Inc., is that the cost of tuition has gone up significantly faster than the amount of income students typically manage to generate throughout of their post-secondary studies.

Many students already have other significant expenses such as rent, food and student loans to worry about—so how will you know if you also have the finances to accommodate owning and operating a car on top of these things? Do you really need the convenience, independence, and mobility of a car at your disposal 24/7? Your best bet is to sit down and really consider your budget and financial situation to see if car ownership is something you can afford.

To make this task easier, CAA’s Driving Costs Calculator is a useful tool for understanding the bigger picture and getting a better sense of the true costs associated with owning a car.

If you’d like to see the numbers as they apply specifically to a student’s situation, I’ve also provided my personal breakdown below, outlining the average costs of operating my family’s 17-year-old car, which I’ve been extremely privileged to drive and be responsible for over the last three years. My costs include the expected—gas, insurance, licence renewals—as well as the unexpected, like the suspension repair I paid $1,111.01 for in Year 2, and the exhaust leak that cost me $666.70 in Year 3. 

*Assumes 8.4 L/100 km and $116.6 CDN per litre

Average annual costs over 3 years of ownership

As you make your own decision, consider here are some of the most significant expenses of car ownership to consider:

Gas

“What goes down, will eventually come up,” says D’Arbelles, referring to Canada’s gas prices during the COVID-19 pandemic. Even though fuel may seem cheap now, gas is likely to be one of the biggest expenses when it comes to owning a vehicle, according to D’Arbelles, although it is highly variable. Understanding the average cost of gas in your area or where you’ll be driving is an important factor to consider when thinking about buying a vehicle. To get a general sense of how much you might spend on gas, take the number of kilometres you expect to drive each year, divide it by your expected fuel economy, then multiply that number by the average price of gas in your area.

With an old midsize family sedan such as mine, fuel expenses will take a significant chunk out of your budget—but it won’t be nearly as bad as what you would have to pay for most trucks, SUVs or high-performance vehicles. Despite being a car enthusiast and president of the Vintage Automobile Racing Association of Canada (VARAC), Michalos advises students to choose a vehicle that is best suited for their financial situation and needs at school, rather than their wants or aesthetic preferences.

Maintenance

Maintenance costs will vary greatly, depending on if you’re buying a new or used car. Routine and general maintenance costs can easily be forgotten about and overlooked at times, but they should absolutely be accounted for in your budget, D’Arbelles advises. The older the vehicle is, the more likely the costs to maintain it will be higher. The newer the vehicle is, the less expensive its upkeep will be initially, but keep in mind you’ll also pay more to acquire a new vehicle.

I’ve been working at a car dealership for the last three years, which explains how I manage to keep my maintenance costs relatively low on such an old vehicle—I get a discount on service. Look around and find a mechanic you trust, who also offers fair prices. Getting some of the major work done at a dealership would have cost me more than double what I ended up paying at independent shops. Having a better-than-average understanding of maintaining a car will also give you a significant advantage in the long run—if you aren’t afraid to get your hands dirty, there are thousands of resources online which can teach you to work on your own car and help you identify issues that need attention, potentially saving you hundreds or thousands of dollars, on top of the satisfaction of fixing or maintaining something yourself. (For example, many people handle their own seasonal tire changes.)

Insurance and registration fees

There are numerous ways to save money on insurance if you take the time to consider the dozens of discounts you might qualify for. Factors such as what kind of car you drive, how old it is, your age, sex, where you live, your driving record, and even your grades are just some of the things to consider when shopping for the best premium. Insurance will vary significantly based on your lifestyle—but as a student and young driver, you can expect your rate to account for one of the pricier areas of your budget, if not the most expensive.

I’m extremely fortunate that my parents help pay the cost of insurance on my car, since it is personally by far the most expensive payment that has to be made each year. It can help to remember that even if you aren’t driving much and your car is just sitting in the driveway, it can still be costing you a lot of money just to keep it insured. Try not to rush the process of shopping around for the best insurance rates, and consider the fact that certain lifestyle choices and failing to plan ahead could result in your paying much more than you have to over time.

Registration fees can be an easy thing to forget about as a new driver and doing so might result in you having to pay a hefty fine if you get pulled over. Each year, you have to renew your vehicle’s licence plate sticker, which will cost $120 for Southern Ontario residents, and $60 if you live in Northern Ontario. (Check with your provincial ministry of transportation for specific costs where you live.)

Depreciation

Depreciation is the steepest cost associated with owning a new vehicle, according to D’Arbelles, accounting for roughly half of the ownership costs associated with owning a vehicle. It’s also one of the most overlooked expenses. When you purchase a vehicle, you’re purchasing an asset that depreciates over time—meaning towards the end of your car’s life cycle, it will be significantly less valuable than the price you paid for it. (I was lucky not to have to pay for the use of my family’s Honda, so depreciation isn’t a factor in my ownership costs. If it was, I likely would have been much more hesitant about owning a vehicle.)

Since depreciation gets less significant as the car ages, buying a used car that holds its value well can be a wise choice.

Parking and tires

These two costs will vary depending on where you live.

If you don’t have a private driveway or if you use the school’s parking lot frequently, prepare to pay a sizeable amount of money on parking permits. You can avoid paying expensive parking fees at school by parking on residential side streets instead, which may be a little bit farther from class, but worth the time for the money you’ll save, in most cases.

If you live where it snows a significant amount for part of the year, proper winter tires can be a costly but smart and worthwhile investment in the long run since they will decrease your chances of getting into an accident, and will often even help lower your insurance premium. (Note that winter tires are required in Quebec.)

Is car ownership the right call for you as a student?

There are so many factors to consider and each individual’s situation is be completely unique, so only you can truly gauge if car ownership is worth it at a particular point in time. Perhaps owning a car allows you to live rent-free at home, and commute to your classes daily, saving you money. Try to fully understand the true costs of purchasing, owning and maintaining a vehicle each year, and whether you can cover those expenses with your expected income.

Between rideshare services and public transit, which could both be relied on more than personal vehicles in the near future, most students likely won’t even considered car ownership because of the costs associated with it, suggests Michalos.

However, for those who are willing to take the financial risks of owning a vehicle, or are fortunate enough to have financial assistance, cars be a great benefit, a form of independence, and an important lesson in financial responsibility.

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