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Owning a new car is getting more expensive. Here's why

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The pandemic, supply chain issues and inflation have driven up the cost of owning a new car and experts say prices aren’t expected to return to pre-COVID levels anytime soon.

“New car prices have been going up on a month over month basis since the middle of last year," said Baris Akyurek, Director of Marketing Intelligence with AutoTrader.

Data from AutoTrader found that the average price of a used vehicle in October was $37,000, 19.9 per cent higher than the year before. The average price of a new vehicle is $57,519, an 18.5 per cent increase over the year before.

Once you factor in car insurance, rising interest rates and maintenance, the cost of owning a car has increased dramatically.

Ratehub.ca, a website that compares insurance companies and their premiums, took a look at the total cost of owning a vehicle.

A study by Ratehub.ca found insurance, fuel costs and higher interest rates are all making owning a vehicle a larger financial commitment.

"Getting a car now your interest rate is going to be higher if you have a loan. It’s just the idea that people should know that owning a car now is going to be more expensive," said Matt Hands, Ratehub’s Director of Insurance.

Cost of Owning a Vehicle

Depreciation $258

Interest $217

Gas $200

Parking $200

Insurance $111

Maintenance $81

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Monthly cost $1,077

Annual cost $12,924

As new vehicles’ prices go up along with interest rates, more drivers are taking out longer term loans to try and keep their monthly payments lower. Car loans of six, seven and even eight years are becoming more common.

Insurance costs continue to rise due to inflation, auto theft and increasing costs to repair vehicles with technology.

"A couple of years ago, or 10 years ago, a windshield would be a couple of hundred dollars to replace, but now with some vehicles depending on the technology in the car it can be $1,000 or more,” said Hands.

Manufacturers have been able to increase the new vehicle supply and used car prices are coming down as dealers get more inventory, but don't expect prices to drop dramatically.

"We expect prices will keep softening in 2023 but we do not expect prices to go back to pre-COVID levels anytime soon," said Akyurek.

According to Statistics Canada transportation accounts for about 20 per cent of the average Canadians monthly budget. If you're spending more than that you may want to review your costs.

If you live in the city using public transit, ride sharing and occasionally renting a car might be cheaper than owning one.

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