As the motor vehicle sale regulator in Ontario, OMVIC protects public interest by raising awareness of consumer rights and enhancing industry professionalism for registered motor vehicle dealers and salespeople. As part of our mandate, we seek to promote understanding of trends in the industry to ensure car buyers can make a safe and informed purchase.
A current trend car buyers need to be aware of is the rising cost of owning a vehicle. It’s something that is getting pricier by the day. From the moment you drive off the dealership lot, the costs begin to pile up, making it a significant financial commitment. Here are the top reasons why owning a car in Ontario is becoming increasingly expensive.
1. Purchase price increase:
The first hurdle in owning a vehicle is the price tag itself. Since the pandemic, the cost of purchasing a car has been steadily climbing. Whether you’re eyeing a brand-new model or a reliable used car, be prepared to pay more money than ever before.
While the price of a vehicle remains higher than 2019, vehicle supply is steadily increasing which may allow for more discounts and some ability to negotiate with salespersons. It’s essential for prospective buyers to note that under the Motor Vehicle Dealers Act (MVDA), dealerships are obligated to disclose the all-in price of the vehicle in their advertisements.
It’s crucial to remember that the only permitted additional charges on top of the advertised price are HST and licensing fees. If your final bill contains other undisclosed expenses, we strongly advise you to decline the transaction and reach out to OMVIC for assistance.
2. Soaring insurance rates:
Once you’ve secured your wheels, there will be additional expenses to consider. Insurance rates in Ontario have been skyrocketing, hitting drivers hard in the wallet. With each passing year, insurance premiums seem to increase, making it challenging for drivers to keep up with the costs.
This has been in part due to the rise in auto theft. In Ontario, where motor vehicle theft rates have been a concern in certain areas, insurance companies may view the risk of theft as higher. This perception of increased risk can translate into higher premiums for drivers across the province, regardless of whether they live in areas with high theft rates or not.
3. Gas prices taking a toll:
Fueling up your vehicle is another ongoing expense that can’t be ignored. With fluctuating gas prices, filling up the tank can put a strain on your finances, especially if you rely on your car for daily commuting or long-distance travel.
4. Parking predicaments:
For those living in urban areas without a private driveway, finding affordable parking can be a nightmare. Public parking spaces come at a premium, adding another layer of expense to owning a vehicle in Ontario’s bustling cities. It’s critical to factor in the cost of monthly parking fees when considering a vehicle purchase.
5. Maintenance matters:
When looking at purchasing a vehicle, you must also include possible maintenance costs when budgeting.
Regular maintenance is crucial for keeping your vehicle running smoothly, but it comes at a cost. From oil changes to tire rotations and unexpected repairs, the expenses can add up quickly, putting a dent in your budget.
While OMVIC doesn’t regulate vehicle maintenance directly, it does require dealerships to disclose the past use, history or condition of a vehicle in writing at the time of sale. This transparency helps car buyers anticipate potential maintenance costs and make informed purchasing decisions.
6. Interest rates on the rise:
With higher interest rates prevailing, financing a vehicle has become increasingly expensive. Many consumers opt to finance their cars, spreading out the cost over time. However, with interest rates on the rise, borrowers end up paying more in the long run, making car ownership even more financially challenging.
Consumers can consult with the dealer to arrange financing as dealers often have access to numerous lenders that may provide terms or rates unavailable elsewhere.
We also suggest comparing lenders before making a purchase. Consumers are encouraged to contact their financial institution and inquire about the terms and interest rates they can offer. This allows you to comparison shop with the financing available at the dealership.
Currently, the average new vehicle loan payment is about $880 per month and almost 30 per cent of buyers who finance their purchase are paying $1,000 or more. Nearly 60 per cent of new vehicle loans have a term of 84 months or more.
The combination of long loan terms and depreciation can cause another challenge for both borrowers and lenders. Increasingly, the outstanding balance of the loan is greater than the resale value of the vehicle and you may end up owing more for a car than it is worth– a condition known as negative equity.
With rising costs, more and more car buyers are selecting a longer loan period to decrease their monthly payment. This means for some car buyers they may find themselves trapped in a cycle of negative equity, where they owe more on their car loan than the car is worth. This can lead to financial strain if they need to sell or trade in the vehicle before paying off the loan.
Additionally, it may limit their options for purchasing a new vehicle or securing favourable financing terms in the future, as lenders may be hesitant to extend credit to individuals with negative equity.
7. Impact of higher cost of Living:
Ontario’s higher cost of living compounds the financial burden of owning a vehicle. With housing, groceries, and other essentials eating into household budgets, there’s less room to accommodate the rising costs associated with car ownership.
In light of these escalating expenses, it’s no wonder that many Ontarians are feeling the squeeze when it comes to owning a vehicle. From the initial purchase price to ongoing expenses like insurance, gas, parking, and maintenance, the costs can quickly add up, putting a strain on household finances.
With the higher cost of living, it’s imperative you do not sign a vehicle contract until you are fully committed to the agreement. Once you provide your deposit and sign the contract, you are legally bound to purchase or lease the vehicle. There is no cooling-off period in Ontario, so attempting to cancel the agreement after signing means risking the loss of your deposit. Dealers are not obligated to return your deposit if you choose to cancel after signing the contract.
Additionally, if cancellation occurs, the dealer may seek compensation for expenses incurred due to the contract’s termination. These expenses, known as liquidated damages, must be reasonable and justifiable by the dealer. Alternatively, the dealer might pursue civil action against the customer, seeking court enforcement of the contract.
As expenses continue to climb, drivers must carefully consider the true cost of car ownership and explore ways to mitigate the financial impact. By providing resources such as car buying education, dispute resolution services, and enforcing regulations, OMVIC works to mitigate potential financial risks associated with buying a vehicle. This assistance can offer Ontarians peace of mind as they navigate the financial challenges of vehicle ownership. OMVIC.ca provides a wealth of information to aid prospective car buyers at the outset of their purchasing journey, offering valuable tips to ensure that their vehicle is a secure choice for the future.