To Commute or Not Commute – The Cost of Owning a Car

To Commute or Not Commute – The Cost of Owning a Car

According to a 2011 National Household Survey, 15.4 million Canadians commute to work. And why do people commute? The most obvious answer is that the cost of owning a home is significantly more affordable outside of the major metropolitan areas. But when you factor in the price of driving a car you may be surprised to find that you are not much better off.

Now, the following is just a hypothetical situation and there are obviously a number of different factors that determine where people live. This is a very basic calculation but I think it gets my point across. We live and work in Oakville, Ontario. I live 12km away from my work and my husband is only 9km from his work. Many of our co-workers live outside Oakville in more reasonably priced housing areas such as Milton, Hamilton, and Guelph. For our example we will use Hamilton as the comparison. In Oakville the average price of a home is $1,052,785. In Hamilton, the average price of a home is $555,000. That’s a difference of $497,785. A savings of nearly $500,000 seems worth the commute… until you consider the cost of owning and maintaining a vehicle.

The cost of owning a car is a pretty penny. A great start to see how much your vehicle is costing you is with this article from the Globe and Mail. For our example we will use $0.52/km as the approximate cost of owning and operating your vehicle. Hypothetically, if I were to live 12km from my office (24km/day) and worked there up until retirement, owning a car will cost me $139,526.40. However, if I commuted my entire career from Hamilton I would be driving approximately 84km per day. Owning a car and commuting would cost me $488,342.40.

Cost of Owning a Car from Oakville

24km/day X 5 days a week = 120km/week

120km per week X 52 weeks per year = 6,240 km/year

If I started working right after graduation (age 22) up until retirement (age 65) I will have worked for 43 years.

6,240km/year X 43 years = 268,320 km over working career

268,320km X $0.52/km = 139,526.40 spent owning a car.

Cost of Owning a Car and Commuting from Hamilton

84km/day X 5 days a week = 420km/week

420km/week X 52 weeks per year = 21,840km/year

21,840km/year X 43 years = 939,120km over working career

939,120km X $0.52/km = $488,342.40 spent owning a car

As you can see, the cost of owning a car and commuting nearly offsets the savings of more affordable housing. While commuting looks to be $148,969.00 cheaper than owning a home close to work, consider how you will not recover the cost of the car expenses as cars depreciate in value. Instead, you are better off buying the more expensive home that is closer to work since real estate appreciates in value.

Now I am well aware that not everyone can afford to buy a million dollar home, but the point I want to make is that every financial decision we make needs to be analyzed from all angles. Yes, commuting may allow you to buy a more affordable home, but as you can see, the cost of owning car and commuting can significantly offset those savings in the long run. And for me the more time I spend in the car, the less time I get to spend with my family and friends which at the end of the day is priceless.

If you are a commuter I challenge you to use the simple calculation from the example to see how much you spend on commuting, the results may shock you. Let me know what you come up with!


1 Comment

  1. Tina deGroot
    July 13, 2017 / 8:14 am

    Very interesting calculations. I like how you added that you realize people can’t buy million dollar homes. Life is about choices and often we are afraid to step out of the comfort of what we know.

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