MBF3C Costs of Operating a Vehicle Handout

The purchase or lease of a vehicle represents only part of the cost of driving. There are also many costs involved in the day-to-day operation of a vehicle. These costs vary, depending on where you live, the type of vehicle you drive, and the distance you drive. The regular expenses involved in operating a vehicle include fuel costs, maintenance costs, insurance costs, and licence costs.

Fuel Costs

The amount of fuel a vehicle uses is often a factor in the choice of the type of vehicle to buy or lease. Information about the fuel consumption of a vehicle can be obtained from the salesperson from whom you buy or lease a vehicle. It can also be obtained from the website of National Resources Canada. The website has information on how fuel consumption ratings are determined, and provides the fuel consumption ratings for many vehicles.

Fuel consumption ratings are expressed either in miles per Imperial gallon or in liters per 100 kilometers. Once you know the fuel consumption rating for the vehicle you drive, the approximate distance you drive in a year and an estimate of the average cost per liter of fuel, you can estimate the yearly cost of fuel.

Ex.1: Oliver’s car has a fuel consumption rating of 5.8 L/100 km. Oliver estimates that he drives 20000 km per year and the average cost of fuel during the year is 76¢ / L. Estimate Oliver’s fuel cost for the year.

Maintenance Costs

A second major expense in operating a vehicle is the cost of maintenance. Vehicle manufacturers stress the importance of regularly scheduled maintenance to keep a vehicle in good running order and to maintain its value. The manufacturer’s recommended maintenance schedule for any vehicle can be obtained through the dealer or on the internet.

Here is a sample vehicle maintenance schedule.

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Vehicle Maintenance Schedule Recommended Service Frequency Frequency Approximate (km) (months) Cost ($) Lube, oil and filter 5000 3 29.95 Tire Rotation and Brake Inspection 10000 6 41.50 Wheel Alignment Inspection 25000 12 69.75 Cooling System 50000 24 72.95 Tune-up and Emission Control 50000 30 225.00 Automatic Transmission 85000 51 145.00

Ex.2: Thelma purchases a new car. She will use the car to drive to work every day. She estimates that she will drive 35000 km in the first year. Use the vehicle maintenance schedule to estimate Thelma’s maintenance costs in the first year including taxes.

Insurance Costs

Insurance is another item that contributes to the yearly operating cost of a vehicle. Canadian law requires that all purchases and leased vehicles be insured. All drivers are required to have personal liability coverage. Personal liability coverage provides insurance against lawsuits in the event that someone is injured in an accident in which the driver is involved. It also covers the cost of damage to other cars and property caused by the driver’s car.

If you finance a vehicle, you must also have collision and comprehensive coverage. Collision coverage pays for damage to your car if you are in an accident or replaces a car that is damaged beyond repair. Comprehensive coverage covers theft and damage to your car from things such as falling trees, fire, hail and flood.

The cost of car insurance varies with the type of coverage provided and with the individual driver. Some factors that influence this cost are where you live, your age and marital status, the amount you drive, your driving record and the purposes for which you use your vehicle. Car insurance payments may be made annually, semi-annually or monthly.

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Licence Costs

Licence fees include both the driver’s licence and the vehicle licence plate. At the present time, a driver’s licence is renewed every 5 years, while the vehicle licence plate is renewed every year or every second year. The renewals must be done on or before your birthday in the year the renewal is required.

Ex.3: In the first 3 years Sal owns his SUV, he drive 102653 km. The average cost of fuel is 81¢ / L. Sal’s SUV has a fuel consumption rating of 12.7 L / 100 km. He maintains his vehicle according to the suggested maintenance schedule. Sal pays $1259 insurance per year. He renewed his driver’s licence at a cost of $50. His vehicle licence plate is renewed every year at a cost of $74. What was Sal’s average monthly operating cost in the 3 year period?

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