Can You Save Money Buying a Used Vehicle?

• We ran the numbers to get a sense of what the costs are to own and insure a used vehicle versus a new model.
• A vehicle that travels 20,000 kilometres per year costs approximately $1,500 annually in maintenance.
• The average auto premium for a driver in Toronto in 2020 was $2,201 per year.

You’ve hit the point where you need to buy a new car. The options before you are many. One of the first things that may cross your mind is whether you should purchase a shiny, new vehicle, or a sturdy, used set of wheels. But can you save money buying a used vehicle?

Buying new means you needn’t worry if the vehicle you’re eyeing has been involved in collisions or had multiple repairs, and it’ll come with a warranty. One of the main disadvantages of buying new is that the car’s value depreciates in a relatively short period of time.

Buying a used vehicle, meanwhile, tends to be cheaper and usually features a lower car insurance premium, but you may need to pay more in maintenance and repair costs than a new car to keep it humming.

Decisions, decisions. To help you come to one, we looked into what the costs are to own and insure a used vehicle versus a new model. We ran the numbers of the purchase prices, maintenance costs and car insurance costs for three vehicles that are among the most popular in Canada: a Honda Civic sedan, Ford F-150 pickup, and Toyota RAV4 SUV.

Used vehicles are cheaper than new cars as the original owner has already absorbed the biggest hit in depreciation. According to Carfax, the value could fall more than 10% after the first month, another 10% after the first year, and 15% a year over the next four years. All told, the average value of a new car will drop 60% over five years.

The average cost of vehicle maintenance and repairs

Pinning down an exact maintenance cost for any vehicle is tricky because there are many factors involved such as its age, mileage, condition, and how you treat and drive it.

Think about the usual stuff you need to pay for to keep a car roadworthy and in tip-top shape:

• Oil and filter changes
• Car washes
• Swapping all-season tires for winter tires each year and vice-versa
• New wiper blades
• Wheel alignment
• Changing air filters and topping up fluids
• New brakes

Older cars tend to require more maintenance, but according to Canada Drives, a car or truck that travels about 20,000 kilometres per year costs approximately $1,500 annually in maintenance. That’s $125 per month. Call it a starting point to determine what your annual vehicle repair bill will be. However, what your yearly vehicle repair bill proves to be may vary by the make and model.

Using CAA’s Driving Costs Calculator, we compared the models we selected to get a better picture of what the overall costs are to own them based on driving 20,000 kilometres per year over a five-year period.

We also ran a few quotes on RATESDOTCA using the profile of a 30-year-old male driver living in Toronto with a clean driving record (no at-fault collisions or traffic convictions) who has been licensed and insured since 2008. He drives 15,000 kilometres per year, and is seeking a standard car insurance policy as a primary driver, which includes comprehensive and collision coverages with $1,000 deductibles each, and $1 million worth of third-party liability protection.

It’s also worth noting the average auto premium in Toronto as of December 2020 was $2,201 per year. Here's what we found:

Honda Civic sedan

Difference: The 2021 Civic costs $8,327 more to buy and $92 more per year to insure. The annual driving costs are $1,197.59 less than its 2018 counterpart.

Ford F-150 pickup

Difference: The 2021 F-150 costs $15,990 more to buy and $32 more per year to insure. The annual driving costs are $564.63 less than its 2018 counterpart.

Toyota RAV4 SUV

Difference: The 2021 RAV4 costs $4,698 more to buy and $87 more per year to insure. The annual driving costs are $970.44 less than its 2018 counterpart.

Concerning the three vehicle brands we zeroed in on, a Toyota tends to have the lowest annual repair bill over a 10-year period (US$5,500 or C$6,775.53 approx.), Hondas are estimated to be US$7,200 or C$8,869.79 over a decade, and Fords are about US$9,100 or C$11,210 in maintenance over a 10-year lifespan.

From an insurance perspective, between the vehicle model types we selected, the Ford F-150 pickup is the cheapest vehicle to insure whether it’s a used or new model. The Ford F-Series were Canada’s top-selling pickup trucks in 2020, but compared to others, they are the eighth least expensive pickups to insure.

The bottom line: choosing to buy a new or used vehicle

As with many other decisions we make in life, what the right choice is for you when figuring out to buy a new or used vehicle depends on your budget. Do you want to take on the cost of financing a new vehicle for five or more years? You will pay a slightly higher insurance premium for a vehicle that is more likely to be targeted by thieves but will shell out less for maintenance. Or would paying less for a used car that is cheaper to insure but costs more to maintain be better?

Try using the Canadian Black Book online evaluation tool to gauge which way to go. You can do a search for new and used vehicles to learn their estimated values. Regardless of whether you buy new or used, it’s worthwhile to set aside what the average monthly maintenance bill may be for the car you get based on your research. If you can, up the amount you sock away each month for maintenance and repair costs as the vehicle ages.

Also, since car insurance premiums change frequently, keep tabs on what you’re paying for coverage by comparing policies and premiums at least annually and before your policy is up for renewal. Sticking with the same auto insurer without shopping around may not be your best option for finding affordable coverage.