What the $#&*! My Vehicle Costs Me HOW Much?
Okay, brace yourself for this staggering figure: did you know…
your vehicle might cost you $678, 000 or more over your lifetime?
That’s right, that’s the true cost of car ownership, and it could be siphoning almost 3/4 of a million dollars out of your pocket.
We all know that vehicles, especially brand new ones, can be expensive. That’s why there are so many financing options on offer. However, I find that few people know the true cost of vehicle ownership. Trust me, the true cost is far higher than the price tag you see on a vehicle when you’re shopping around.
Let’s Deconstruct the True Cost of Car Ownership
According to the Canadian Automobile Association (CAA), vehicle ownership accounts for 20% of an individual’s take home pay every year.
And maybe you only really need that vehicle to get to and from work… in that case, that’s 20% of your salary just to get to your desk!
20% is an enormous amount when you consider that, on average, Canadians are only saving 3.4% of their income. (Click here to read a related post about savings.)
So, here’s an important life question:
How many finite hours of your life do you think you trade just to pay for your vehicle each year? Well, CAA’s study shows us that when we consider vehicle depreciation, Canadians spend anywhere from $8,600 to $13, 000 per year on their vehicles.
Let’s Do the Math on the True Cost of Car Ownership
Let’s take the middle of that range:
- Let’s assume you spend $10,000 a year on a vehicle.
- Let’s say you make an annual income of $65, 000 a year before taxes.
- If you work an average work week (37 hours), your hourly wage is around $33.78 ($65, 000/ 1, 924 work hours per year).
However, we all know that’s not the amount that accumulates in our bank accounts. We need to contribute to roads, schools, essential services… aka, we need to pay taxes.
With an annual salary of $65,000, you would pay $13,600 in taxes, leaving you with $51,400.
So, I guess we don’t actually take home that $33.78 an hour. What we make, in this instance, is $26.71 an hour ($51,400/1,924 hours). For every dollar earned, 80 cents ends up in the bank.
Okay, so that’s the sobering reality of how much money we actually have to work with once we have paid the necessary taxes. Now, let’s think about that tin box we are cruising around in.
Are you ready to see how much of our precious, finite time we are trading for a depreciating vehicle?
You would need to spend 50 working days a year just to pay for your vehicle.
50! 50 working days is 374 HOURS just to pay for a vehicle. The average Canadian is trading away 50 working days, or 374 hours, of their life just to pay for a vehicle.
And how often do you hear people saying, “I wish I just had 1 more hour in my day.” Well, coincidentally we are working 374 hours a year just to pay for our vehicle…
What if we never had a vehicle at all?
We would get 374 hours back, which is more than an hour a day! Definitely food for thought… though I know this isn’t a viable option for everyone.
Most Canadians purchase new vehicles every 3 – 5 years, and simply cycle through the process of taking out a loan, paying it down, and then taking out a new loan. If we did this for 40 years (25 years old to 65 years old), we would be trading 166 months or 5.4 years of our lives to pay for a vehicle.
What do you think vehicles cost us over a 40-year time period?
Next week, we will be diving into the true cost of owning a vehicle. I’ll give you some ideas on how we can substantially reduce this cost because, let’s face it, many of us do need a vehicle.
Before next week, what I want you think about is this:
Have you been intentional with your vehicle expenses?
Do you know how much your vehicle actually costs you (especially when you consider that your vehicle sits parked 96% of the time)?