8 Hidden Costs of Buying a Car for a Student The Ultimate Guide

Getting from one place to another will be a huge obstacle when you are in university and college. As a college student, you might be daydreaming about owning a cool car.

A four-wheeler is not only a status symbol but a necessity.  A personal vehicle may relieve you from crowded public vehicles, saves time, helpful in carrying your grocery bags etc.

According to an article in Motor illustrated the average cost of a new car is $40,490.

But at the same time, it might be a cash-burning machine if you make a wrong choice. You may have savings to pay for the down payment but what about operating costs that you will face in future and the truth is - owning a car keys has many hidden costs attached to it.

In this blog, we try to highlight the facts that will help you to make a quality decision of whether to own a car or not?

Read it to last to get an EXPERT TIP
So let's analyze these hidden costs one by one.

1. How will you pay for your dream?

The first obstacle between you and your car keys is this question. You have two options - In Cash or Finance a Car. This is both applicable for new and used cars.

I will truly appreciate your money management skills and patience if you have enough savings to buy a car in cash. You have saved yourself from monthly payments. Hands off to you!

Now here is the reality!

According to analytic software organization FICO about 2/3rd of Canadians when they purchased their last new or used vehicle they applied for financing at the dealership. This means you have to make down payments and borrow the rest.

So if you are from one of them, then you have to consider the following things:

If you have no credit history then no bank is going to put their money for your fantasy. Another option left for you is to finance your car from a private dealership. Here I will suggest you to not fall into the trap of "zero down" or "zero payments for one year" promises. Keep your eyes open on monthly payments, interest rates, amount of the loan, duration of loan, etc.

In others words, do your homework.

Check out our car loan calculator for calculating monthly payments etc.

Here are list of 5 good resources that our experts sorted out from the internet which will help you in analyzing and comparing the pros and cons of different models. You can check their reviews and what experts in the auto industry are talking about these models.

  1. caranddriver.com
  2. wheels.ca
  3. driving.ca
  4. motorland.com
  5. consumerreports.org

2. Budgeting for Gasoline

Gas prices play an important role after you own four wheels. As D'Arbelles said "What goes down will eventually come up" referring to gas prices in Canada.  So you have to calculate the average dollars that will be spent on gasoline.

Here you have to check the mileage that car offers. So in my opinion going for fuel-efficient cars is a better option.

Michalos - president of Vintage Automobile Racing Association advises students to choose a vehicle that is best suited for their financial situation and need rather than their desires or wants.

Now, the next thing is how will you estimate the monthly gas budget?

Here is the method to do calculate the cost of monthly fuel consumption
  1. Estimate annual mileage (For this we take the number of miles you drive car is 12,000 miles)
  2. Now divide the number by 12 to get monthly mileage(12,000/12 = 1000 miles per month)
  3. Divide that number by the car's gas mileage (For this case we take it 20 MPG)
  4. Now multiply that number by current fuel prices

This will give you ongoing average costing of fuel consumed by your four wheels.

Keep Reading!

3. Repairs and Maintenance

This is a variable-hidden cost of owning a car. It depends on whether you buy a new car or a used car.

The rule of thumb is - Older the vehicle more is its maintenance and repairs cost. 

According to a study done by Canadian Automobile Association (CAA), the average maintenance cost ranges from 500$ to 700$ a year. This includes oil changes, replacing air filters etc. but excludes old tires or purchasing winter tires.

You can also estimate this cost by this scenario.

Suppose your car brakes needs to be changed after 20,000 miles and your annual car driving mileage are 10,000 miles. So your brakes will last for 2 years. Estimate this cost for other things like oil change, tires rotation and replacements.

Now here the good news

You can lower this cost!

Here's a pro-tip - There are many online resources available from which you can learn simple tasks like changing oil, tires and save some dollars provided you are willing to make your hands dirty. Furthermore, find a trusty mechanic which offers you fair prices.

4. Car Insurance

Legally you need car insurance before you take your four-wheeler fantasy on the road. Insurance in Canada depends on various factors. Main things that insurance brokers take into account before car insurance are the following:-

  1. Driving experience - How long are you driving in Canada
  2. Age - Young people have to pay more premiums than adults
  3. Driving  History like how many accidents or speeding tickets you got
  4. Gender - Man has to pay higher insurance than women
  5. Used or new car

According to the Insurance Bureau of Canada, the cost of insurance in BC is higher than in other provinces. IBC calculate this data by dividing the total premium per province by the total number of vehicles per province.

So make sure you know the car insurance premium in advance. There are numerous ways by which you can lower your insurance costs.

Don't forget to do your research.

5. Depreciation

Depreciation is the silent and unavoidable enemy of car owners. The value of your car starts depreciating from the moment you buy it.

Depreciation means a decrease in the value of an asset or a tangible thing over time, in our case its car. As per data, most new cars deprecate near about 20% within the first year. So if you purchase a car for $40,000 then after one year is cost will be $40,000 - $8000 = $32,000

Depreciation is inevitable but you can slow it down if you take care of the following points

  1. Keep your maintenance records - This could be like getting your car service up to date. This gives you proof that the car is well maintained and a good negotiation point when you sell it.
  2. Look for a used car - Since new cars depreciate by 20% then it makes perfect sense to buy a used car. While getting used cars from car dealerships ask for the vehicle history report. This report will give you service history, accident history, money owed etc.
  3. Look for extended warranty - Buying a car at an extra warranty if you are looking to keep it for a long time. To know more about extended warranty check this GoMechanic blog.

6. License Plates and Registration Fees

As a new driver, you usually ignore this cost but for license and registration, you will have to pay some fees. A registration fee is necessary to make you a legal owner of the vehicle as per the law.

The dealership from which you have brought your car will do this part for you. To do this registration process you may need the following things:

  1. Proof of valid insurance policy
  2. Ownership permit
  3. Driver's License
  4. Vehicle License plates

Now for License plates, you have to pay 15-25 bucks more depending upon your province.

Every vehicle needs two license plates one at the front and the other at the back. Some students are looking to get the customized license plate. A customized license plate is more costly than a normal one and you may have to pay up to $50. Further, this validation sticker has to be renewed after two to three years.

These license plates are for the owners which mean if you will sell that vehicle in future you can keep plates with yourself.

7. Parking Fees

You cannot park your four-wheeler anywhere. If you are using your university parking then be prepared to bear the cost of parking permits. These costs may also vary from $50 - $150 if you calculate it annually.

If you don't have a garage then you may have to rent that space. So be prepared for this cost also.

8. Fines for breaking the rules

I sincerely believe that you are a disciplined human being and have the patience that's why you have made up to this point.

But in life things happens like you may be driving your car and forget about the speed limit.

Now you have to pay penalty which depends on your location. For example, 10 km/hr over speed will cost you $40 and in Quebec, it will more than $200. Even fines are double in working zones.


According to Practical Money Skills Canada, you should never borrow more than 20% of your yearly income to finance or lease a car and your monthly payments will be below 10%.

So be intelligent and do your research before buying a car. Make sure you use your car not your car that uses you.

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