The Real Cost of Vehicle Ownership

The Real Cost of Vehicle Ownership

The following article was published in the March 2016 edition of the District News.

Most people don't truly understand all of the costs associated with owning/purchasing a vehicle.  Let's take a look at the math.

For this example we are going to use Ford because I drive an F150.   I based vehicle purchase costs on the manufacturer’s suggested retail price (MRSP) as reported in Canadian Black Book.  The trade-in values are the average wholesale values from Canadian Black Book.  Be realistic, in your own analysis, about kilometers driven per year, litres/100 kms (based on driving style), insurance rates, repairs and maintenance, etc.  The point is, put pen to paper and do some calculations.  My two sample calculations are based on buying a 2010 Ford Focus and a 2010 Ford F150 new in 2010 and then selling them 6 years later.  The purchases were financed at 5% interest rate over 6 years.  The details are as follows:

Cost of Vehicle Ownership
Cost of Vehicle Ownership

Now that you have done all of the calculations, let's start thinking about what this all means.  Focus (not Ford) on the cost per kilometer which is $0.27 for the Ford Focus and $0.43 for the Ford F150.  I live in Quispamsis, NB and it's a 13 km trip each way to my office in Saint John, or 26 kms round trip (you'll need to add the costs of tolls if that applies to you).  I drive a Ford F150 so that costs me $11.18 per day, $55.90 per week and approximately $246 per month just to drive back and forth to my office.  That is necessary travel and there is a cost for it, but, I could reduce the cost dramatically if I drove a cheaper more fuel efficient vehicle such as the Ford Focus.

For some people, it actually may make sense not to own a vehicle and just walk, bike, use public transit and taxis for regular travel and then rent a vehicle when you have to take a longer trip.  This works well for people living in large urban centers but not so much for those of us in rural areas or with children.

Where you really need to consider this cost is on all of your discretionary travel.  For me, the Saturday trip to Moncton (263 kms round-trip - $124), or trip to Costco in Saint John (30 kms round trip - $14).  The lesson is, think about the cost of ownership before you buy and then think about the cost of use and think ahead to consolidate trips, skip the trip, or car pool with friends and co-workers.  The cost of vehicle ownership also needs to be considered when you choose where you live.  While the cost of housing may be cheaper here in rural New Brunswick, the cost of the travel can offset the housing cost savings.

If each of us had a meter in our vehicle that required you to pay for each trip, we would probably pay closer attention to the cost.

Powell Associates Ltd. is a licensed insolvency trustee focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses.  We offer free consultations to review your personal financial situation and practical debt resolution options.  Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton or Charlottetown - it's your choice.