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# Driving Affordability

January 7, 2020

When discussing driving affordability, many folks don’t really think their way through the real costs of driving or the value to the government in taxes.  Let’s start with some data:

1. The average price of a new car in Canada is \$36,100
2. The average Ontario driver drives 15,200 kms per year or 1,267 per month
3. The average driver spends \$1,186 per year on vehicle repairs and maintenance
4. The average cost of car insurance in Ontario is \$1,920 per year

Now let’s break that down to monthly costs – and remember these are averages so some people will pay a lot more and some a lot less.

1. Assuming a five-year loan is obtained for the vehicle at 7% interest the monthly payment over a five-year loan would be \$715.  The total paid would be \$42,900 of which \$6,800 would be interest.
2. With the average cost of gasoline being pegged at \$1.22 and assuming that the driver got 100 kms to 10 litres the monthly cost of gasoline would be about \$160
3. Repairs and maintenance work out to about \$99 per month; and
4. Car insurance averages \$160 per month

The overall cost to the driver (vehicle owner) is about \$1,134 per month or \$13,608 per year.  Given that the average Canadian earns about \$36,000 per year and has an after-tax income of about \$2,437 that means that up to 47% of the average Ontario car owner’s income is going to vehicle operating costs.  With a population of about 14,570,000 and about 8,700,000 registered vehicles that means that 60% of the population has a registered vehicle on the road.

The government’s cut:

The average HST on a new vehicle is \$4,693 times about 80,000 units sold in Ontario represents some \$375,440,000 in HST on new car sales, and probably a similar value in used car sales, remember you don’t pay the tax once.  The taxes on gasoline sales are \$5,512,320,000 per annum and about \$1,044,000,000 is paid for license stickers.  With average car repairs being about \$1,186 per year another \$1,341,366,000 is paid for HST.  The total tax revenue so far is about \$8,263,126,000 – now I may be missing other taxes but the point remains that the tax revenue is substantial and the total costs to consumers is extremely high, and much higher than folks may realize.