Automobiles are a necessity in most North American cities due to their sprawling characteristics making it almost impossible for cities to develop mass public transit networks that service the low-density urban neighborhoods. If you live in an area offering public transportation – take advantage of it! As I will show you, the costs of car ownership are significant and likely hampering your other financial goals.

When you think of the costs of car ownership, are you considering all the costs? Depreciation is likely the largest cost to car ownership, and the newer and more expensive the car, the more it will depreciate. To put things into perspective, I like to track my total cost of ownership for each vehicle I have owned. I create a spreadsheet like the one shown in the Table below to get a good understanding of how much each km costs to drive. Once you know how much every km costs you, each future km you drive will feel different, and you will be more conscious about how much each trip costs you to make. You may find yourself walking more or considering alternative modes of transportation like cycling or public transit.

For this example, I have used America’s best-selling vehicle, the Ford F-150. If purchased new in 2019 and driven the average mileage of 24,150/year for 5 years – the term of the loan – the costs of the vehicle if sold today would have been $0.59 per km driven! That means that every 10-km trip costs you $5.91. If your workplace is 25 km away from your home, then your cost just to get to-and-from work is $148/week or $640/month or 7,681/year.  And this is only a common F-150.

Drivers of luxury Range Rovers have costs over $2.50/km, and that same 25-km commute costs them over $21,000/year when considering the same factors as the F-150. Contrarily, a used economy car can cost you less than $0.25/km thanks to its minimal depreciation, good fuel economy, and low servicing costs. When we consider the utility of the automobile – to get you from one location to another – why do some of us choose to pay $0.25/km, while others opt to pay over $2.50/km? Now I won’t pretend that driving a Range Rover isn’t awesome, but is the cost worth the premium, specifically if you can’t afford it? How much can you afford?