Understanding Total Cost of Luxury Car Ownership

Understanding Total Cost of Luxury Car Ownership

Posted on July 5, 2024

Calculating the total cost of ownership (TCO) is a financial analysis considering various factors associated with owning and operating a vehicle. The TCO is a valuable metric for comparing the overall cost of different car models or makes, and it can help you make an informed decision when purchasing a new or used car.

The formula for calculating the total cost of ownership involves adding the initial purchase value to all hidden and maintenance expenses and subtracting any potential resale or residual value. This sounds very simple but can involve a fair amount of work.

Let’s look at the individual components of this formula for buying a car.

Initial Purchase Price

Start with the MSRP of the vehicle. Add all the options and upgrades, as luxury vehicles often offer various customization options. This will give the base price of the vehicle, but it’s not the total amount charged by the dealer.

The next thing to consider is taxes and fees. These include GST and PST, and other fees (e.g., registration, licensing). Luxury Vehicles are also subject to a Luxury Tax (for high-priced vehicles) that was introduced in 2022. This tax applies to new vehicles priced above $100,000, and is calculated based on the total price before GST.

Delivery Fees must also be factored in, as must all the financing costs, such as interest and insurance. The last thing to consider is any dealership fees.  

If you’re buying an electric car you can claim a federal government rebate for eligible vehicles. Some provinces also provide additional rebates.  

Ongoing Maintenance Costs

Ongoing Maintenance costs cover a wide variety of costs. The most obvious are the costs of the services and repairs that can be expected in the coming years. Discuss the ongoing maintenance and repair costs with the dealer to establish the cost of services. This will give you a good idea of what you can expect to face. 

Add to this the cost of tires, and insurance. Also calculate the cost of fuel for the vehicle.

Electric cars have very different ongoing maintenance costs, which tend to be considerably lower than ICE vehicles. 

Asset Value at the End of Your Ownership

The last thing you must calculate is how much your vehicle will be worth in the year you intend to sell it. This calculation is called depreciation, and in Canada, this is calculated at 20% for the first year and then 10 to 15% for the second year and onwards. This will give you a rough idea of how much you will get for your vehicle.

Crunching the Numbers: Calculating Total Cost of Car Ownership in Canada

Using the total purchase price + maintenance cost + total cost of fuel—asset value at the end of ownership will help you understand the total cost of luxury car ownership. Several online calculators will assist with this calculation, but the friendly staff at Faraz Auto Sales in North York, Ontario, will be happy to help with luxury cars for sale in Toronto.