The majority of Canadians who own a vehicle plan to purchase a new one every five years, spending an average of $26,044, according to a BMO report. Overall, vehicle expenses account for the third-largest household monthly expense for Canadians.
Further, car ownership is high in Canada – 83% of those surveyed own a vehicle. And buying is far more popular than leasing, with 82% saying they will buy.
The report also found:
- Canadians spend $437.48 per month ($5,250 annually) on vehicle costs, including payments, insurance, gas and maintenance;
- Vehicle costs account for 15% of the average household budget, trailing only housing costs (33%) and food expenses (19%);
- Percentage of funds set aside for vehicle costs is 7 points higher than that allocated to savings and investments (8%); and 9 points higher than debt repayment costs (6%); and
- 49% paid for their current vehicle with a loan, while 11% paid using a line of credit.
Before you buy, make sure you can afford it, warns Ray O’Kane, managing director and head, National Retail Dealership Finance, BMO Bank of Montreal. “One of the most important decisions is how to finance the vehicle, as automotive expenses can consume a significant portion of overall household expenses.”
He adds, “A sound strategy is for consumers to maintain a shorter financing amortization period to reduce interest expenses and create more flexibility for future purchasing decisions.”