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Car Insurance

Have you thought it through?

If you’re a novice when it comes to buying a car, you might think that the cost is limited to the purchase or leasing price. In reality, however, that’s only the tip of the iceberg. Have you considered insurance, fuel, maintenance and depreciation costs as well?

In general, avoid impulse purchases and take the time to carefully assess all possible costs. It’s all about learning everything you can before you make the final decision. Here are some key points to help you evaluate the costs:

Get advance quotes on insurance

Before you make that decision about what to buy, be sure to get an idea of insurance costs for various makes and models. Start by requesting quotes online, so that you’re armed with comparative information.

Insurance companies generally rate cars based on the claims history of the vehicle. They look at factors such as repair costs, theft, vandalism and safety ratings. For example, certain models are statistically proven less likely to be involved in an accident or stolen. Some vehicles have better safety and handling characteristics. Vehicles that are cheaper to repair may also cost less to insure.

Another key factor that will affect your insurance premium will be your driving record. If you have no accidents, tickets and claims of any kind, you’re in a better position. Your location in Canada will also affect your insurance premium.

If you’re a member of an alumni or professional association, you may be eligible for a discounted rate. Be sure you ask your insurer about this.

Choose a fuel-friendly vehicle

The make and model of your car can obviously have a dramatic impact on the cost of fuel. A good example is the current shift away from SUVs and larger recreational vehicles. If you’re buying a hybrid, you’re making a wise ecological decision. However, the initial high costs of a hybrid may eat into any savings on fuel. Be aware that Transport Canada offers a rebate to people who buy fuel-efficient cars. You can get reviews and unbiased research from the Natural Resources Fuel Consumption Guide.

Once you’ve purchased your vehicle, you’ll also have to consider the costs of keeping it in good condition, since a poorly tuned engine can increase fuel costs considerably. Keeping your tires inflated to the level recommended by the manufacturer can also conserve fuel and prolong the tires’ life span. A single tire that is under-inflated by two pounds of pressure will increase your fuel consumption by 1%.

Plan for maintenance costs

Maintenance and repair costs are not that significant until your warranty has expired. However, it’s important to factor in costs for regular maintenance. Generally speaking, the maintenance schedule is determined by the manufacturer of the vehicle. These guidelines are useful and help you avoid inflated prices on repairs from dealers.

If you’re buying a used car, the brand, model and condition will affect its value. If you plan to keep it for several years, you should focus on vehicle durability and avoid cars with a history of more than routine repairs. If you’re buying a used car privately, you can also ask for maintenance records.

Consider your depreciation costs

Depreciation, or the decline in a car’s value over the course of its useful life, can also have a big impact on your pocketbook. Whether you’re buying a new or used vehicle, you need to have a good handle on the cost of depreciation. Generally speaking, a car loses up to 15- 20% of its value each year. The depreciation in a car’s first year tends to be even steeper. As soon as you drive a car off the lot, you lose a large chunk of its original value. Why? When you buy a car from the dealer, you pay a retail price. When you leave the lot, your car is worth its wholesale price, which is what the dealer would be willing to pay if you returned it.

By keeping these and other factors in mind, you’ll have a better sense of the real cost of your car.