Your biggest vehicle expense? Your No. 1 cost of ownership? Depreciation, of course.
“For the consumer, selecting a vehicle with a lower depreciation rate will reduce their overall cost-of-ownership,” says Canadian Black Book executive vice-president Larry Shred, whose company has long been a reliable source for used-car values.
The CBB is used by dealers as a pricing guide to help them determine trade-in values. But savvy car shoppers can use the CBB’s “Trade-in Value” estimator (canadianblackbook.com) to calculate depreciation. By doing so, you can determine how much value your car loses over time – and get moving down the road to a complete understanding of what you’re paying for your daily driver.
| 2010 CHEVROLET COBALT LT | 2010 DODGE GRAND CARAVAN | 2010 TOYOTA PRIUS PREMIUM | |
| Depreciation: Depreciation is heavily weighted for first four years of ownership. If you keep the car longer, cost per kilometre is reduced dramatically | 0.20 | 0.32 | 0.24 |
| Fuel: Based on $1.02/litre | 0.08 | 0.11 | 0.04 |
| Maintenance/Repairs/Tires | 0.05 | 0.05 | 0.04 |
| Licence/registration: Based on $200/year | 0.01 | 0.01 | 0.01 |
| Cost to finance: Based on 6.25 per cent interest rate and a 10 per cent down payment on a four-year loan | 0.04 | 0.05 | 0.06 |
| Cost of government (13% HST) | 0.04 | 0.05 | 0.05 |
| Insurance: Based on typical insurance coverage with no young drivers | 0.06 | 0.10 | 0.11 |
| Total ownership cost/km over first four years | 0.47 | 0.69 | 0.54 |
| Total annual ownership cost based on driving 18,000 km/year | $8,539.94 | $13,833.85 | $10,877.69 |
Figures in chart are dollars per kilometre. Source: Canadian Automobile Association and Globe Drive research
Sure, if you keep your vehicle until it qualifies for a $300 Recycle Your Ride government bonus, depreciation is a non-factor. But most Canadians get rid of their vehicle before it turns 15 years old and for them it makes sense to factor depreciation as a real cost.
This is where CBB can really help. Using data drawn from a variety of real-time transactions – auto auctions, dealer sales, etc. – this site delivers what many believe are highly accurate current and projected used-vehicle values. Really, it’s a point-and-click operation: select the model and year, choose options and trim packages, plug in the kilometres on the odometer and up pops a low, medium and high value range in seconds.
From there it’s a matter of plugging in a few other numbers to nail down a pretty accurate picture of your total ownership costs. As a guide to figuring out total ownership costs, consider what the Canadian Automobile Association (CAA) does annually.
The CAA’s Driving Costs 2010 Edition determined that depreciation accounts for $3,628 in annual ownership costs on a 2010 Chevrolet Cobalt LT – or 20 cents/kilometre based on 18,000 km of driving a year. The No. 2 cost is insurance at $1,850 a year or six cents/km. Financing at $666 a year (four cents/km) is the No. 3 cost of ownership for the Cobalt.
Using the CAA figures, and research by Globe Drive to include the cost of government (HST) at 4 cents/km, the total cost of ownership for the Cobalt LT comes to 47 cents/km or $8,539.94 a year. That’s a substantial figure, but still dramatically less than the 69 cents/km to drive a new Dodge Grand Caravan minivan. The big cost: 32 cents/km in depreciation or $5,768/year. Total cost of ownership for the Grand Caravan: $13,833.85 per year.
In the middle is the Toyota Prius which in depreciation alone costs 24 cents/km. However, at four cents/km in fuel costs, the Prius comes in at half the figure for the Cobalt and about a third that of the Grand Caravan. Insurance, at 11 cents/km, is the highest of the three. Overall, the Prius costs 54 cents/km or $10,877.69 a year to own.
Some, of course, contend that depreciation and financing are not legitimate, across-the-board ownership costs. And not everyone pays to borrow the money for a new vehicle. But for this article we have included it as a cost. Indeed, the vehicle management company Runzheimer Canada does just that in calculating costs for the CAA.
