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CFS Annual Report - 2016

Reimbursement for
Business Use of Personal Vehicles
Model Year 2016

 Study prepared for
The Treasury Board of Canada Secretariat

 by Corporate Fleet Services

  November 2015

1       Executive Summary

Corporate Fleet Services (CFS) has been mandated by the Treasury Board of Canada Secretariat to perform the annual evaluation of per-kilometre reimbursement rates for government employees required to use their personal vehicles while performing government business. This study assesses all vehicle operating expenses and provides recommendations for reimbursement rates for each Canadian Province and Territory.

The present study is based on 2016 model year vehicles and accounts for all of the following:

This report summarizes all assumptions, methodology, values and findings. It presents up-to-date recommended rates of reimbursement for consideration by the Treasury Board of Canada Secretariat. 

1.1     Methodology and evaluation

The recommendations are given for the year of 2016 for:

These rates are given on a straight per-kilometre basis, for each Province and Territory. This is intended to accurately account for differences in vehicle operating costs across Canada.

The recommendations are based on total costs of operating privately owned or leased vehicles. In order to reflect realistic conditions, the study assumes an annual driving distance of 20,000 kilometres and ownership terms of both four and five years. Fixed costs include ownership expenses consisting of depreciation, financing or leasing interest and taxes, as well as vehicle insurance and registration. Variable costs cover fuel, preventative maintenance, repairs, tires and miscellaneous items. All cost variations between the Provinces and Territories are accounted for, as well as the special driving conditions in the three Territories.

Average nationwide costs of operating personally owned or leased vehicles were determined to be $0.500 per kilometre versus $0.510 in the previous Fuel Update (for publication on  October 1st 2015) and $0.515 in the previous year Annual Report (for publication on January 1st 2015). The overall decrease in operating costs was primarily due to decreasing fuel prices.

The following table indicates Canadian average expenses by cost component as calculated in the current study, in dollars per kilometre:

Cost components

Cost (dollars/km)

Depreciation

$0.169

Interest

$0.007

Sales tax

$0.036

Registration

$0.008

Insurance

$0.086

Fuel

$0.099

Preventative maintenance

$0.055

Repairs

$0.019

Tires

$0.014

Miscellaneous

$0.007

Total

$0.500

The largest component of vehicle operating expenses is depreciation, which accounts for 33.8% of total costs, followed by fuel expenses at 19.8% and insurance premium expenses at 17.2%.

2       Preamble

Corporate Fleet Services (CFS) has been mandated by the Treasury Board of Canada Secretariat to calculate reimbursement rates for business use of personal vehicles by government employees according to the parameters listed in a Statement of Work issued through a competitive RFP process.

CFS is therefore pleased to present this study with its findings and recommendations, based on extensive research performed on behalf of the Treasury Board of Canada Secretariat. 

2.1     Note on methodology

The current study follows strictly the methodology employed in the previous Annual Report (for publication on January 1st 2015). The analysis is deemed to accurately reflect costs in the current Canadian automotive marketplace and is described in detail in Sections 3 through 6.

2.2     Policy recommendations

It is our opinion that public employees continue to be reimbursed for government business use of personal vehicles on a cents per kilometre basis, reflective of the practice that has been used over the course of the past decade. This is deemed to be consistent with current public and private sector practices as well as it accounts for a fair and simple reimbursement method in line with accepted reimbursement policies across Canada.

However, since there are substantial differences among the ten Canadian Provinces and three Territories, these rates are calculated separately for each Province and Territory in order to account for differences in vehicle operating costs.

3       Methodology And Cost Component Determination

3.1     Assumptions

The present study's objective is to determine reimbursement rates for business use of personal vehicles by government employees, as accurately as possible, in order to reflect current Canadian automotive market conditions. In order to accomplish this, an in-depth analysis was performed on all components of the total cost of operating a vehicle.

The methodology employed follows all the elements listed in the Statement of Work and used in the previous annual study. The purpose was to calculate the different rates of reimbursement, in cents per kilometre, separately for all ten Canadian Provinces as well as the three Territories. In light of this we performed research and data analysis to calculate costs for the following components, which represent the total costs of running a personal vehicle:

1.      Fixed expenses

2.      Variable expenses

All calculations assumed four and five year retention periods as well as considered all vehicles to run an average of 20,000 kilometres per year.

In addition, in order to assess realistic prevalent insurance premiums by Province and Territory, the study used a certain demographic range to reflect the average government employee. The demographics are based on data available from the Treasury Board of Canada Secretariat as well as Statistics Canada. The following characteristics were used, consistent with the parameters used in the previous year study:

The following table gives an overview of the cost proportion of the components involved in total expenses of operating a vehicle:

Expense Cost Proportion
Depreciation 33.8%
Fuel 19.8%
Insurance 17.2%
Interest 1.4%
Preventative maintenance 11.0%
Registration 1.6%
Repairs 3.8%
Sales tax 7.2%
Tires 2.8%
Miscellaneous 1.4%

3.2     Vehicle selection

In order to be reflective of the Canadian marketplace, the same approach as last year was taken. Therefore the current study focused on 52 vehicle models (nameplates) grouped under five vehicle classes for the Provinces, with one extra class for the Territories (pick-up trucks). The models studied account for a significant portion of the Canadian vehicle market and they were deemed representative for the types of vehicles used by government employees.

The following list describes the parameters used:

Make

Model

Class

Weight for Provinces

2016 Model Year Pricing

Honda

Civic

Compact

7.0%

$21,785

Toyota

Corolla

Compact

5.5%

$22,325

Hyundai

Elantra

Compact

5.3%

$21,794

Mazda

3

Compact

3.9%

$23,845

Chevrolet

Cruze Limited

Compact

3.4%

$23,415

Volkswagen

Jetta

Compact

3.2%

$25,600

Ford

Focus

Compact

2.3%

$22,099

Volkswagen

Golf

Compact

2.2%

$26,700

Nissan

Sentra

Compact

1.7%

$21,598*

Kia

Soul

Compact

1.5%

$21,610

Toyota

Camry

Mid-Size

1.9%

$26,165

Ford

Fusion

Mid-Size

1.8%

$24,499

Hyundai

Sonata

Mid-Size

1.6%

$26,544

Honda

Accord

Mid-Size

1.5%

$27,145

Chrysler

200

Mid-Size

1.3%

$26,140

Chevrolet

Malibu

Mid-Size

1.1%

$25,895

Nissan

Altima

Mid-Size

0.8%

$25,498*

Volkswagen

Passat

Mid-Size

0.7%

$26,300

Kia

Optima

Mid-Size

0.7%

$26,330*

Subaru

Legacy

Mid-Size

0.4%

$26,390

Dodge

Grand Caravan

Minivan

4.9%

$29,740

Toyota

Sienna

Minivan

1.6%

$32,770*

Honda

Odyssey

Minivan

1.3%

$32,385

Chrysler

Town & Country

Minivan

1.0%

$45,940

Kia

Rondo

Minivan

0.4%

$25,310

Mazda

5

Minivan

0.3%

$25,090

Kia

Sedona

Minivan

0.3%

$29,410

Ford

Escape

Small Crossover/SUV

5.1%

$28,589

Toyota

RAV4

Small Crossover/SUV

4.4%

$28,985

Honda

CR-V

Small Crossover/SUV

4.1%

$30,245

Nissan

Rogue

Small Crossover/SUV

3.9%

$28,408

Jeep

Cherokee

Small Crossover/SUV

3.3%

$29,440

Hyundai

Santa Fe Sport

Small Crossover/SUV

2.8%

$33,594

Dodge

Journey

Small Crossover/SUV

2.7%

$37,240

Mazda

CX-5

Small Crossover/SUV

2.4%

$30,090

Chevrolet

Equinox

Small Crossover/SUV

2.1%

$30,695

Ford

Edge

Small Crossover/SUV

2.0%

$36,189

Jeep

Wrangler

Medium Crossover/SUV

2.4%

$30,435

Ford

Explorer

Medium Crossover/SUV

1.6%

$37,689

Jeep

Grand Cherokee

Medium Crossover/SUV

1.2%

$43,590*

Nissan

Pathfinder

Medium Crossover/SUV

1.1%

$35,458*

Honda

Pilot

Medium Crossover/SUV

0.8%

$40,185

Hyundai

Santa Fe XL

Medium Crossover/SUV

0.7%

$37,944

GMC

Acadia

Medium Crossover/SUV

0.7%

$41,545

Toyota

4Runner

Medium Crossover/SUV

0.6%

$45,520

Chevrolet

Traverse

Medium Crossover/SUV

0.4%

$38,555

Dodge

Durango

Medium Crossover/SUV

0.4%

$43,590*

* Note: The current study used 2015 pricing for seven vehicles for which prices were not published yet

Following are two tables showing the weight of each class as well as that of each brand name, for all vehicles studied, relative to their respective Canadian sales:

Distribution of vehicles studied by class

Vehicle Class Distribution
Compact 36%
Medium Crossover/SUV 10%
Mid-size 11%
Minivan 10%
Small Crossover/SUV 33%

Distribution of vehicles studied by brand name

Brand Name Distribution
Chevrolet 7.0%
Chrysler 2.4%
Dodge 8.0%
Ford 12.8%
GMC 0.7%
Honda 14.7%
Hyundai 10.4%
Jeep 6.8%
KIA 2.8%
Mazda 6.6%
Nissan 7.4%
Subaru 0.4%
Toyota 14.0%
Volkswagen 6.0%
  • each Province or Territory
  • each vehicle studied
  • each cost component (fixed and variable expenses)

3.3     Data sources

The present study used information available in the public domain, data from previous studies that we have performed, as well as new research and consultations with specialized professionals and agencies. For each element studied we confirmed the accuracy of the data by consulting additional data sources and cross-referencing the findings. All data sources were assessed for reliability and were thoroughly documented. 

3.4     Use of weighted averages

In order to accurately reflect current market conditions, same as in the previous year report, the present study follows a weighted average approach instead of a simple average, by employing weighted arithmetic means where relevant. This was deemed necessary because not all elements calculated contribute the same amount to the total. For example, according to the most recent information published by Statistics Canada there were a total of 7,710,424 light duty vehicles registered in Ontario, whereas in the Yukon there were only 31,066 vehicles registered, and thus the two regions contribute significantly different amounts to the overall Canadian average. This method was employed throughout the study to better reflect the reality of the Canadian market.

In the same manner, certain vehicle models sell significantly more units on the Canadian market than others and therefore they contribute more to the overall weighted average. For example, the Honda Civic sells considerably more units in Canada than a Chevrolet Cruze, almost double that amount, and therefore the operating costs for the Honda Civic should reflect proportionately in the total calculated weighted average for each component of the cost. See Section 3.2 - Vehicle selection for details.

4       Fixed Expenses Analysis

4.1     Ownership costs

4.1.1     Current model-year vehicle prices

4.1.1.1       Vehicle pricing

For each vehicle under study, we have extracted 2016 model year MSRP (Manufacturer Suggested Retail Price) values. The main tool employed was AutoQuote, the industry leading software that provides up-to-date detailed pricing for all new vehicles available on the Canadian market. At the time of the current study, pricing was not yet available for seven (7) vehicle models out of a total of 52. For these, 2015 model year values were used, as in our experience these values vary only slightly from year to year and are generally reflective of 2016 values.

MSRP pricing is established by the manufacturers for the whole model year and is valid across Canada. Variations of the MSRP prices throughout the year are infrequent. Values extracted from AutoQuote were also cross-checked against the information published by vehicle manufacturers.

On average, MSRP prices increased by approximately 3% compared to the previous year.

4.1.1.2       Prevalent manufacturer rebates

Vehicle manufacturers usually offer retail rebates for new vehicles in order to promote sales and distinguish themselves from their competition. We have thus performed substantial research to determine prevalent retail rebates for all vehicles studied, for the last 11 months. A period of approximately one year was used as retail rebates vary from month to month as well as from region to region. Prevalent retail rebates display variation by:

All the data obtained was integrated into a 2,028 data-points matrix and subsequently reflected in the purchase price of each vehicle, by Province. Direct price negotiation between vehicle retailers and buying individuals could not be accounted for in this study.

Rebates range from $0 to $12,900, depending primarily on each manufacturer's marketing strategy, with an average of approximately $1,880.

Over the last year, vehicle manufacturer rebates increased on average by $280 (15%). This was primarily due to a strong used vehicle resale market over the past year. This led to a 1% decrease of ownership costs relative to MSRP.

4.1.1.3       Federal and provincial levies

Provincial and federal levies apply to the purchase of new vehicles, and are intended in principle to offset environmental costs such as disposal and recycling of air conditioning fluids or tires. For the vehicles under study the following levies apply:

According to the Excise Tax Act federal and provincial sales taxes apply to these levies as they are considered to form part of the cost of a new vehicle. All applicable fees and levies have been factored in the analysis.

4.1.2     Method of vehicle acquisition

We have performed research on the Canadian market to establish which methods of vehicle acquisition are the most prevalent, as well as what market share is held by each. We have therefore come to the conclusion that in Canada the new vehicle market is distributed among the following three forms of acquisition:

In comparison to the previous year, a slight shift from cash purchases towards financing was observed. The lower interest rates and higher rebates offered by manufacturers supported this trend. Please refer to Section 4.1.5 for details.

Therefore, in order to accurately reflect the reality of the market, we have analysed all three forms of acquisition and subsequently calculated a weighted average for each vehicle under study according to their proportion of the market.

The net cost of vehicle ownership was calculated according to the method of acquisition (cash, financing or leasing). All three vehicle acquisition methods were addressed with their specific particularities, proportionately with their prevalence in the Canadian automotive landscape, as follows:

4.1.3     Four and five year retention periods

We calculated ownership costs for both four and five-year retention periods, terms that were found to be reflective of average retention periods for the Canadian automotive landscape. All calculations were performed by vehicle and per Province taking into account both retention periods, and the results were averaged to yield one value per vehicle and per Province or Territory.

4.1.4     Vehicles driven 20,000 kilometres annually

All vehicles under study were considered to be driven 20,000 km per year. This is deemed to be a reasonable benchmark to base all reimbursement calculations on, since the average Canadian vehicle is driven between 16,000 and 24,000 km per year. All calculations were made using this benchmark all across Canada.

4.1.5     Financing interest rates

We have performed an in-depth research to determine the prevalent interest rates provided by vehicle manufacturers. The manufacturers offer what is known as subvented rates to promote sales of new vehicles. These rates are typically substantially lower than regular financial institutions' loans. Since these reduced rates are prevalent on the market, we deemed it reflective of reality to integrate these rates into our calculations.

Interest rates vary considerably by:

All these variations were integrated into a 2,704 data-points matrix and subsequently reflected in the ownership costs of each vehicle, by Province and Territory.

It is important to note that certain manufacturers do not offer subvented leasing (e.g. Chrysler) and that some may choose to not offer either financing or leasing for certain contract terms (e.g. Ford do not offer five-year leasing rates for some of their vehicle models but they do offer four-year terms). In these instances, average market (financial institutions or third party leasing company) rates were used. The prevalent financing interest rates data originated with the vehicle manufacturers and all the information was thoroughly documented.

All interest rates (financing and leasing) varied from 0% to 7.99% for manufacturers' subvented rates, while the third-party interest rates were approximated at 8%. The average interest rate for lease contracts was 3.55% while the financing rate was 1.62%. Overall, interest rates decreased on average by 9% versus the previous year.

Similarly to rebates, a strong vehicle resale market resulted in an overall decrease in interest rates charged by manufacturers for financing or leasing. This resulted in a decrease of approximately 0.9% in ownership costs relative to MSRP. 

4.1.6     Sales taxes

Federal and provincial sales taxes (GST, PST, QST, HST) apply to the full cost of a new vehicle according to the taxation method of each Province or Territory. Sales taxes also apply to:

Whether a vehicle is cash-purchased, financed or leased, taxes apply differently. For both cash purchases and financing contracts, the full price of a new vehicle is subject to sales tax, whereas for leased vehicles sales tax is only applied to monthly lease payments (including tax on interest).

Sales taxes have been factored into all calculations as to accurately reflect the direct costs to the end user of a vehicle. Following is a table listing the combined GST/PST/QST/HST applicable for each Province and Territory for the period relevant to the current study:

Sales taxes in Canada

Province

Combined sales taxes

Alberta

5%

British Columbia

12%

Manitoba

13%

New Brunswick

13%

Newfoundland and Labrador

15%

Nova Scotia

15%

Northwest Territories

5%

Nunavut

5%

Ontario

13%

Prince Edward Island

14%

Quebec

14.975%

Saskatchewan

10%

Yukon

5%

4.1.6.1       Taxes on fuel

Fuel prices listed at the pump have all taxes included, as is the standard throughout Canada. Fuel is usually taxed federally, provincially as well as regionally. Approximately a third of the price paid at the pump is made up of the following:

All fuel prices given in the present study have all taxes included.

4.1.6.2       Taxes on insurance premiums

Regular sales tax (GST/PST/QST/HST) does not apply to insurance premiums anywhere in Canada. However, a tax on insurance premiums of 9% applies to automobile insurance in the Province of Quebec, charged to consumers similarly to sales taxes. Insurance premiums given in the present study for Quebec have this tax included.

4.1.6.3       Recent and upcoming tax rate changes

We have consulted directly with all relevant public sources in order to determine if there are any impending tax rate changes across Canada in the near future. In the province of Newfoundland and Labrador an increase in the HST (Harmonized Sales Tax) becomes effective January 1st 2016. Since this will directly affect overall costs of vehicle operation in this province for the period for which the current reimbursement rates will be in effect, the new HST (15%) is reflected in all calculations for Newfoundland and Labrador.

For each subsequent update of the present study, research will be performed again for all Canadian Provinces and Territories to determine if tax amounts have changed or if any changes are foreseen in the future. 

4.1.7     Resale values (vehicle remarketing)

In order to accurately assess total costs of vehicle ownership an analysis was performed, for each vehicle under study, to project resale values for retention periods of four and five years, based on historic patterns. Resale values were extracted from resale market data for the same or similar vehicle model. The research was based on:

The values were extracted from the Canadian Black Book, an industry standard for establishing values for used cars and were supported through consultation with specialized vehicle resellers, as well as employing other relevant tools. Final values were projected for:

Resale values were integrated into the depreciation analysis differently depending on the type of acquisition, as follows:

  • Vehicle model
  • Province or Territory
  • Retention periods (four and five years)
  • Model trim

On average, vehicle resale values were slightly higher than the previous year, by 1% for 4 year-old vehicles and 4% for 5 year-old vehicles. This fact was mainly due to a lower Canadian dollar value as compared to the US dollar, which encourages remarketers from the USA to purchase used Canadian vehicles, increasing the competition and, as a result, driving resale values higher.

Due to the characteristics of the used vehicle market during the past year, pick-up trucks have seen their resale values increase substantially. Effectively, this had a direct impact on reimbursement rates for the Territories, disproportionately lowering them in comparison with the Provinces.

The increase in resale values translates into an average decrease of approximately 0.4% in total costs of ownership relative to the MSRP for Provinces and of 6.1% for the Territories.

4.1.8     Total cost of ownership calculations

For each Province and Territory, total costs of ownership were calculated for:

A weighted average was then performed for all vehicles under study to yield a final cost-of-ownership figure per Province and Territory. All figures were converted and expressed in dollars per kilometre.

The following three tables give a detailed break-down of vehicle ownership costs in Canada in dollars per kilometre,  by vehicle class as well as four and five year retention periods, split by depreciation costs, financing costs and sales taxes, as well as a weighted average according to vehicle sales figures:

DEPRECIATION

Compact

Mid-Size

Minivan

Small Crossover/SUV

Medium Crossover/SUV

Weighted average

4 -yr ownership

$0.162

$0.175

$0.177

$0.188

$0.216

$0.179

5 -yr ownership

$0.141

$0.155

$0.161

$0.168

$0.197

$0.159
           

$0.168

---

INTEREST

Compact

Mid-Size

Minivan

Small Crossover/SUV

Medium Crossover/SUV

Weighted average

4 -yr ownership

$0.002

$0.006

$0.009

$0.005

$0.012

$0.006

5 -yr ownership

$0.003

$0.007

$0.011

$0.006

$0.014

$0.007
           

$0.007

---

SALES TAX

Compact

Mid-Size

Minivan

Small Crossover/SUV

Medium Crossover/SUV

Weighted average*

4 -yr ownership

$0.031

$0.035

$0.040

$0.043

$0.053

$0.039

5 -yr ownership

$0.026

$0.029

$0.033

$0.035

$0.044

$0.032
           

$0.036

* Note: total weighted averages are rounded to 3 decimals.

4.1.9     Costs of ownership changes from the previous year

Total costs of ownership calculated show an average increase of $0.002 per kilometre over the previous year (or a 1% increase) for the Provinces and $0.022 per kilometre decrease for the Territories (a 9% decrease).

While an increase in MSRP prices leads to an increase in overall ownership costs, increased rebates, lower interest rates and higher resale values have the opposite effect, offsetting the increase in prices. The overall result is that total ownership costs only increased slightly for the ten Canadian Provinces (by approximately 1% on average versus the previous year). In contrast, for the Territories, total ownership costs decreased, mainly due to strong resale values of pick-up trucks. 

4.2     Vehicle registration and licensing costs

Vehicle registration, licensing and plating is regulated at the provincial level. Each Canadian Province and Territory has its own regulatory body governing the rules and costs of vehicle licensing. Registration costs are typically charged annually in the form of a registration renewal. In some Provinces there are certain one-time up-front costs that are charged only at the time of the initial vehicle registration.

We have performed a complete study of these costs by contacting all Provincial and Territorial authorities. Registration costs do not have additional taxes applied to them as payment is made directly to the governmental agencies. However, certain upfront costs may have sales tax applied to them (e.g. service charges), depending on the Province where a vehicle is licensed. The terms registration and licensing are used interchangeably in this study.

Registration costs vary by:

All these costs have been integrated in the calculations for each Province and Territory. Annual registration costs vary on average between $40 and $300 and contribute an average of $0.008 per kilometre (weighted average for all of Canada).

The following table lists annual registration costs for all the Provinces and three Territories:

Province/Territory

Annual
registration costs

Registration costs
in $/km

Alberta

$84.45

$0.004

British Columbia

$61.00

$0.003

Manitoba

$154.00

$0.008

New Brunswick

$108.00

$0.005

Newfoundland and Labrador

$160.00

$0.008

Nova Scotia

$110.85

$0.006

Ontario

$108.00

$0.005

Prince Edward Island

$100.00

$0.005

Quebec

$291.53

$0.015

Saskatchewan

$68.00

$0.003

Northwest Territories

$75.00

$0.004

Nunavut

$68.40

$0.003

Yukon

$42.00

$0.002

4.2.1     Note on the Province of Quebec

It must be noted that in Quebec, provincially-regulated bodily injury insurance must be purchased through the annual vehicle registration process. This is the reason why registration costs in Quebec are generally higher than the other Provinces or Territories.

4.3     Vehicle insurance costs

4.3.1     Regulation of vehicle insurance

Insurance rates vary greatly across Canada, primarily due to different provincial laws determining vehicle accident fault, subrogation or no-fault policies. Vehicle insurance is offered by private insurers in Alberta, Ontario, Quebec as well as the four Atlantic Provinces and the three Territories. Quebec however has a hybrid system where bodily injury insurance is provided by the Province through its vehicle registration process, while third-party liability is provided by private insurers. On the other hand, the Provinces of British Columbia, Manitoba and Saskatchewan have mandatory public vehicle insurance. Insurance in these three Provinces is offered exclusively by the provincial governmental bodies that also regulate vehicle registration.

4.3.2     Variability of insurance premiums

Insurance premium rates vary considerably not only from Province to Province, but also according to a substantial number of other parameters related to the insured driver's personal characteristics as well as to the vehicle being insured. Where insurance is offered privately, insurance premiums also vary considerably from one insurer to another.

4.3.3     Analysis of prevalent insurance premiums

In order to maintain consistency with the methodology employed in the previous year's study, we have performed a thorough research into current prevalent insurance premium rates for the average government employee to keep these figures in line with current market conditions.

Insurance premium costs were assessed based on the average government employee as described in Section 3.1. We requested over 350 quotes based on this established demographic directly from private insurers, provincial insurers as well as insurance brokers. In order to reflect real up-to-date insurance premiums for each Province with private insurance, more than four different data sources were used. For Provinces with public insurance the data available from the governing bodies was used.

Following is a table listing average insurance premiums for the ten Provinces and three Territories as well as a comparison with the insurance premiums published in the previous year study, for direct comparison (averaged annual premiums have been rounded up to the nearest $25):

Province/Territory

Current insurance premiums

Insurance costs in $/km

Previous year report
insurance premiums

Alberta

$1,525

$0.076

$1,500

British Columbia

$1,300

$0.065

$1,300

Manitoba

$1,225

$0.061

$1,125

New Brunswick

$1,300

$0.065

$1,275

Newfoundland and Labrador

$1,675

$0.084

$1,725

Nova Scotia

$1,300

$0.065

$1,250

Ontario

$2,525

$0.126

$2,550

Prince Edward Island

$1,075

$0.054

$1,125

Quebec

$1,075

$0.054

$1,000

Saskatchewan

$1,300

$0.065

$1,300

Northwest Territories

$1,725

$0.086

$1,650

Nunavut

$1,725

$0.086

$1,650

Yukon

$1,975

$0.099

$1,900

The values obtained through the present study are deemed to be reflective of the current reality for the established demographic. Insurance rates vary between $1,075 and $2,525, with a Canadian weighted average of $0.086 per kilometre.

5       Variable Expenses Analysis

5.1     Fuel expenses

Fuel expenses are directly related to three main factors: buying location, fuel consumption of the vehicle and time of the year. The current study focuses on gasoline prices across Canada which are strongly related to variations in the world energy market.

5.1.1     Energy Market Context

During 2015, crude oil prices in the global market have seen considerable fluctuations. The year started with a continued downward trend that had was initiated in the late spring of 2014. During the spring of 2015, prices exhibited a certain amount of recovery on the account of geopolitical tensions in Middle-East, as well as expectations of declining US oil production and increased global demand for oil in future. However, this trend was short lived and actually reversed in the following summer period, as the inventory levels remained at record highs. At the same time production remained strong in spite of a relatively high demand for gasoline and reduced rig counts. In the past three months, starting late August, the oil prices have been fluctuating between $40 and $50 per barrel for West Texas Intermediate (WTI) and between $42 and $55 per barrel for the Brent price. The main underlying reasons for this trend are the excessively high inventories and the mismatch between oil production and global demand. This has resulted in keeping prices low but very sensitive to any information reaching the market.

5.1.1.1       Global Crude Oil Demand

According to the World Economic Outlook from the October 2015 report released by the International Monetary Fund, the global growth projections have been adjusted downwards. The growth rate is expected to be at 3.1% in 2015, a decline from the initial projection of 3.3% in the July report. For comparison, global growth was at 3.4% in 2014. The forecast for 2016 is higher, at 3.6% which nevertheless is a decline from 3.8% in July's report. The change in the economic growth has mainly been driven by the economic difficulties in emerging markets while partially offset by better-than-expected results in developed regions, particularly in the European Union.

China, the world's second-largest economy, is continuing to experience economic difficulties resulting in the lowest growth since the 2008-2009 financial crisis. The projected growth rate for China is at 6.8% this year, as compared to 7.3% in 2014. This trend is expected to continue with a projected growth of only 6.3% for 2016.  A number of Latin American countries with economies that are highly depended on oil extraction have been severely affected by the global oil price decline. A number of them are experiencing negative growth rates. For example, Brazil's economy is projected to contract by 3% this year and Venezuela's by 10%, while Russia's economy is also projected to shrink by 3.8% by the end of 2015.

Growth in the Eurozone exceeded previous projections and is now estimated at 1.5% for 2015 compared to the 0.9% from the previous year. This trend is supported by lower oil prices and the depreciation of the Euro currency. The US economy showed signs of recovery after a sluggish first quarter. Lower than average energy prices, an improving housing market and higher employment rates, led to a projected growth rate of 2.6% for 2015.

The latest economic data on the Canadian economy indicates a slower growth in 2015 than initially forecasted.   The growth forecast for Canada is now estimated at 1%, versus the initial projection of 2.2% in April 2015. This is mainly due to lower crude oil and commodity prices.

According to the OPEC Monthly Oil Market Report from November 2015, OPEC's reference basket has remained relatively constant over the course of the last three months, averaging at $45.02 USD per barrel in October. The world crude oil demand in 2015 is expected to grow by 1.50 mb/d (million barrels per day) to an average of 92.86 mb/d, an increase of 1.64% over 2014.

5.1.1.2       Global Crude Oil Supply

Overall, global crude oil supply is expected to grow by about 2.4%, despite the fact that global oil inventories have reached their highest levels in ten years. Despite low prices and record-high inventories, oil-producing countries have not yet reached an agreement to reduce production levels. Projections for 2016 are mixed, with OPEC forecasting an oil supply contraction of 0.3% and the US Energy Information Association's indicating a possible supply growth. The month of October is also the main season of scheduled maintenance in refineries worldwide. Refining capacity declined by approximately 9% in October according to an OPEC report from November 2015.

In the North American context, the official data on rig count activity in 2014 as published by Canada's National Energy Board indicate that Canada was heavily affected. Rig counts dropped from 380 to 200, a 47% decline over the previous year. The same trend has continued in 2015, with Alberta reporting an average active rig count drop of over 50% between January and September 2015, as compared to the same period last year.  In September, Alberta had 113 active rigs, close to the numbers of the 2009 recession. In the US, the number of active oil rigs has been the lowest since June of 2010. Nonetheless, US oil production has remained at record high levels. 

5.1.2     Fuel prices

Typically, summer gasoline prices are higher due to increased production costs and an overall stronger demand. In fall, with the end of the high-driving season, demand is reduced and refineries switch to producing winter-grade gasoline, which is less costly. However, during the same time, refineries perform regular maintenance, which lead to a reduced supply. This exerts an upward pressure on prices, partially offsetting the effects of reduced demand.

Over the course of the past three months, gasoline prices across Canada have shown a steady decline, even though crude oil prices have remained relatively constant. Thanks to high crude oil inventories, the refinery maintenance season has had a diminished impact on gasoline prices than in previous years. With the end of summer and the high driving season, gasoline prices have declined overall. This effect was more pronounced in Eastern Canada, with average prices going down by 11-14% as opposed to western Canada where prices have only declined by approximately 6%.

To meet the high demand for gasoline this past summer, refineries were operating at higher-than-normal rates. Average utilization rates were at 95% in June, a ten-year high. Canadian Western provinces import a large part of their fuel from refineries in the US Mid-West.  The shutdown of refineries in Toledo, Ohio and Joliet, Illinois had a direct impact on fuel prices across Western Canada, driving them up slightly. However, with the return to normal refining operations, gasoline prices have dropped overall, bringing the three-month average down.

On the other hand, the Territories have reacted differently to the recent marked-related events. The Northwest Territories have seen a similar price pattern as the rest of the Western Canada, while the Yukon displayed an increase of gasoline prices over the past three months. Nunavut's gasoline prices are government-regulated and have remained constant.

The Government of Alberta released its Climate Change Strategy on November 22nd 2015 which proposes the implementation of an economy-wide carbon tax. This tax would also apply to transportation fuels, projecting an added seven cents per litre to gasoline prices in Alberta by 2018.

The trend of future prices at the pump is difficult to predict with any degree of confidence. The current energy market still displays signs of volatility that adds to the seasonal effects of switching to summer-grade gasoline as well as the impact of record inventories of fuel.

In Canada, prices of gasoline at the pump include all applicable taxes. Prices vary significantly across the country, mainly due to the difference in the types and amounts of taxes being charged in the different Provinces and Territories.

According to Natural Resources Canada, over 90% of light duty vehicles on Canadian roads run on gasoline. A number of these vehicles are also equipped to be able to run on E85 (ethanol 85%), but for the purpose of the present study all vehicles were considered to run on regular gasoline, as E85 is not readily available at retail outlets.

Prices of gasoline, in Canada, include all applicable taxes. Prices vary significantly across Canada, mainly due to the difference in the types and amounts of taxes being charged on fuel in different Provinces and Territories. We have therefore researched the average prices of regular gasoline charged at the pump. The fuel price data was primarily obtained from Natural Resources Canada, based on weekly published fuel prices for 67 locations across Canada. This data was verified against additional databases made available by third parties that similarly track fuel prices all across Canada.

Consistent with the methodology of the previous study, when determining average gasoline prices per Province or Territory, we have used a weighted average according to population in order to better conform to reality. In this manner, metropolitan population centers account for a greater portion of the total than smaller municipalities.

Fuel price data was extracted for a period of three months (September 1st to November 24th 2015) in order to better reflect current prices. Gasoline prices in Canada varied during this period between $0.814 in Edmonton, AB to $1.297 in Fort St. John, BC, with a national average of $1.066. Subsequent fuel update reports will focus on three months periods following the period covered in the present study.

The following is a table with average regular gasoline prices for all Canadian Provinces and Territories, in dollars per litre, as well as gasoline prices from previous update reports, for comparison:

Province/Territory

Current fuel price ($/litre)

Current fuel cost ($/km)

1 Oct 2015 update ($/litre)

1 Jul 2015 update ($/litre)

1 Apr 2015 update ($/litre)

1 Jan 2015 (Annual Report) ($/litre)

Alberta

$1.009

$0.094

$1.074

$0.937

$0.841

$1.104

British Columbia

$1.178

$0.110

$1.321

$1.244

$1.094

$1.308

Manitoba

$1.012

$0.094

$1.077

$0.953

$0.872

$1.154

New Brunswick

$0.992

$0.093

$1.151

$1.080

$0.981

$1.239

Newfoundland and Labrador

$1.065

$0.099

$1.218

$1.150

$1.053

$1.292

Nova Scotia

$0.999

$0.093

$1.164

$1.117

$0.998

$1.270

Ontario

$1.015

$0.095

$1.171

$1.072

$0.977

$1.224

Prince Edward Island

$1.007

$0.094

$1.173

$1.086

$0.993

$1.267

Quebec

$1.099

$0.103

$1.241

$1.188

$1.078

$1.329

Saskatchewan

$1.036

$0.097

$1.111

$0.979

$0.913

$1.175

Northwest Territories

$1.223

$0.156

$1.314

$1.153

$1.151

$1.385

Nunavut

$1.269

$0.162

$1.269

$1.269

$1.269

$1.269

Yukon

$1.198

$0.153

$1.157

$1.072

$1.100

$1.318

5.1.3     Fuel consumption

For each vehicle under study, fuel consumption figures were extracted from AutoQuote, sinceNatural Resources Canada's EnerGuide was not yet published at the time.  These figures were correlated back to last year's consumption figures to check consistency. These figures are determined by vehicle manufacturers, based on standardized tests, and are published for both city driving and highway driving.

Since the 2015 model year onwards the Government of Canada mandated manufacturers to use an improved testing procedure to determine the fuel consumption ratings of new light-duty vehicles. The new testing methods are meant to "better approximate typical driving conditions and styles by adjusting city and highway ratings to account for air conditioner usage, cold temperature operation and driving at higher speeds with more rapid acceleration and braking. These new test methods (5-cycle testing) result in higher fuel consumption ratings that are more representative of a vehicle's on-road fuel consumption compared to the current (2-cycle testing) methodology" (according to National Resources Canada). The current report used the fuel consumption figures as published by manufacturers, based on the new 5-cycle test method, in line with new regulations set forth by Transport Canada.

In Provinces where the majority of the population lives in large urban centres (e.g. Ontario) vehicles are driven more under city-driving conditions rather than highway-driving conditions. In light of this fact, the percentage of city versus highway driving has been referenced to a 60/40 city/highway split. On the other hand, for the Territories, a reversed 30/70 city/highway split was factored in, due to the predominantly rural character of the Territories and long distances to be covered.

The following table gives average fuel consumption figures by class of vehicle, in litres of gasoline per hundred kilometres:

Fuel consumption (l/100 km)

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Truck

Weighted average

Provinces

7.8

8.6

11.6

9.6

12.4

-

9.3

Territories

-

-

-

9.6

12.4

14.3

12.2

5.1.4     Calculation of fuel expenses

Based on an average of 20,000 kilometres per year and following the methodology described above, the study calculated average costs, per Province or Territory, for all vehicles under study. These numbers were weight-averaged according to population to yield individual fuel costs figures for each Province or Territory.

Fuel contributes on average $0.099 per kilometre to total operating costs, ranging from $0.093 in New Brunswick and Nova Scotia to $0.162 in Nunavut. Future changes will be reported in the next Fuel Update report.

5.2     Vehicle maintenance expenses

In order to keep a vehicle in proper running condition and respect all driving safety requirements, a vehicle must be adequately maintained. Vehicle maintenance involves the following:

5.2.1     Preventative maintenance

Preventative maintenance includes, but is not limited to, the following:

Costs of preventative maintenance were estimated based on previous studies as well as through consultation with specialized garages and qualified mechanics in order to establish frequency and costs for parts and labour. Where applicable an inflation rate of 1% from the previous year has been factored in, as calculated by Statistics Canada. Sales taxes apply to all preventative maintenance costs. 

5.2.2     Projected costs of repairs not covered by manufacturer warranty

Since the current study is considering retention periods of four and five years, a certain cost for projected repairs must be taken into account. Repairs due to accidents are covered by insurance and are reflected in insurance premiums costs. Most manufacturers offer warranties of up to 3 years or 60,000 kilometres (with the exception of Kia, Hyundai, Volkswagen and Mazda, which offer longer warranties). Beyond this period or mileage, any mechanical system that breaks down will incur a direct cost to the owner. 

5.2.3     Tires

The various vehicles under study have different tire requirements, mostly due to different rim sizes. All new vehicles come with a set of standard all-seasons tires. However, if only one set of tires is used, they wear out and need to be replaced, on average after 60,000 kilometres. This implies that at least one new set of tires must be purchased for both four and five year retention periods.

For the purpose of this study, average all-seasons quality tires were considered. Costs of tires vary between $600 and $1,300 for a set of four, mainly depending on the type and size.

5.2.3.1       Adjustments for Quebec and British Columbia

The Province of Quebec mandates the use of winter tires for all light duty vehicles, for the period between December 15th and March 15th. In order to reflect this requirement a 50% increase in cost of tires was factored into the calculations. This accounts for purchasing an additional set of winter tires while offsetting the need to purchase another set of all-season tires for the four-year retention period studied but not necessarily for the five-year period.

In British Columbia, certain roads, especially in mountainous areas mandate the use of winter tires, usually between October 1st and March 31st. A 25% increase in costs of winter tires was factored in the calculations to account for this requirement, in order to reflect the fact that winter tires are only used by a certain portion of vehicles registered in this Province.

5.2.4     Miscellaneous maintenance expenses

There are other common expenses related to maintaining a vehicle that do not fall under the previous three categories but which are necessary for safety as well as aesthetic reasons. The present study continued along the same lines as the previous year's study and allocated a $10 per month allowance for miscellaneous costs such as windshield washer fluid, occasional car wash and polish, light bulbs etc. 

5.2.5     Total costs related to vehicle maintenance

Total maintenance costs were calculated for every Province and Territory. Costs are higher for Quebec and British Columbia mainly due to winter tire regulations. Costs for the three Territories are also higher primarily due to the extra equipment needed to support driving conditions in the North, as detailed in Section 6. Costs are lower for the Province of Alberta mainly due to the fact that there is no provincial sales tax applicable.

The following four tables give a full break-down of vehicle maintenance costs in dollars per kilometre,  by vehicle class as well as four and five year retention periods, split by preventative maintenance, repairs, tires and miscellaneous, as well as weighted averages according to vehicle sales:

PREVENTATIVE MAINTENANCE

Compact

Mid-Size

Minivan

Small Crossover/
SUV

Medium Crossover/
SUV

Weighted Average*

4 –yr ownership

$0.048

$0.049

$0.050

$0.049

$0.051

$0.050

5 –yr ownership

$0.055

$0.058

$0.061

$0.059

$0.062

$0.059
           

$0.055

 ---

REPAIRS

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium
Crossover/
SUV

Weighted
average*

4 -yr ownership

$0.010

$0.010

$0.007

$0.010

$0.009

$0.011

5 -yr ownership

$0.024

$0.025

$0.025

$0.026

$0.026

$0.026
           

$0.019

 ---

TIRES

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium Crossover/
SUV

Weighted average*

4 -yr ownership

$0.010

$0.014

$0.014

$0.015

$0.017

$0.015

5 -yr ownership

$0.008

$0.011

$0.011

$0.012

$0.014

$0.012
           

$0.014

 ---

MISCELLANEOUS

Compact

Mid-Size

Minivan

Small
Crossover/
SUV

Medium Crossover/
SUV

Weighted average*

4 -yr ownership

$0.007

$0.007

$0.007

$0.007

$0.007

$0.007

5 -yr ownership

$0.007

$0.007

$0.007

$0.007

$0.007

$0.007
           

$0.007

* Note that the total weighted averages are rounded to 3 decimals.

6       Operational Costs in The Territories

In order to accurately reflect actual costs of operating vehicles in the three Canadian Territories, the analysis required a different approach than for the ten Provinces. The Territories are mostly rural and driving conditions are harsher, especially in the winter-time. This means that prevalently larger vehicles are used with winter-adapted equipment and therefore the costs for maintenance, tires, fuel and specialized equipment are higher.

This section describes the methodology used for the Territories as well as highlights where it differs from the methodology used for the ten Provinces.

6.1     Vehicle selection for the Territories

The nature of the climate and road conditions in the three Territories is considerably different than for the ten Provinces. Due to this fact, as well as the harsh winter driving conditions that drivers face in the North, the automotive landscape has a different make-up, and as a result trucks and crossovers/SUVs are significantly favoured over compact, mid-size sedans or minivans. Following this rationale, the present study selected three vehicle classes that were deemed representative for the Territories, same as in the previous Annual Report:

The study kept the vehicles studied in the Small and Medium Crossover/SUV categories, added the five most sold pick-up trucks in the Truck category and eliminated the Compact, Mid-size and Minivan classes.

Following is a table listing the vehicles studied for the Territories, as well as the class they belong to and the weight assigned to each according to recent Canadian sales:

Make

Model

Class

Weight for Territories

2016 Model Year Pricing

Ford

Escape

Small Crossover/SUV

6.6%

$28,589

Toyota

RAV4

Small Crossover/SUV

5.7%

$28,985

Honda

CR-V

Small Crossover/SUV

5.3%

$30,245

Nissan

Rogue

Small Crossover/SUV

5.0%

$28,408

Jeep

Cherokee

Small Crossover/SUV

4.2%

$29,440

Hyundai

Santa Fe Sport

Small Crossover/SUV

3.6%

$33,594

Dodge

Journey

Small Crossover/SUV

3.5%

$37,240

Mazda

CX-5

Small Crossover/SUV

3.1%

$30,090

Chevrolet

Equinox

Small Crossover/SUV

2.7%

$30,695

Ford

Edge

Small Crossover/SUV

2.6%

$36,189

Jeep

Wrangler

Medium Crossover/SUV

3.1%

$30,435

Ford

Explorer

Medium Crossover/SUV

2.1%

$37,689

Jeep

Grand Cherokee

Medium Crossover/SUV

1.6%

$43,590*

Nissan

Pathfinder

Medium Crossover/SUV

1.4%

$35,458*

Honda

Pilot

Medium Crossover/SUV

1.0%

$40,185

Hyundai

Santa Fe XL

Medium Crossover/SUV

0.9%

$37,944

GMC

Acadia

Medium Crossover/SUV

0.9%

$41,545

Toyota

4Runner

Medium Crossover/SUV

0.8%

$45,520

Chevrolet

Traverse

Medium Crossover/SUV

0.6%

$38,555

Dodge

Durango

Medium Crossover/SUV

0.5%

$43,590*

Ford

F-Series

Truck

16.6%

$45,399

Ram

Pick Up

Truck

13.1%

$46,440

GMC

Sierra

Truck

7.4%

$44,710

Chevrolet

Silverado

Truck

6.4%

$40,585

Toyota

Tundra

Truck

1.5%

$40,850

* Note: The current study used 2015 pricing for the vehicles for which prices were not yet published

It should be noted that by using the above vehicle classes and models studied for the Territories, overall ownership costs as well as vehicle maintenance costs are higher than for the Provinces. 

6.2     Other operating cost adjustments for the Territories

The methodology to calculate fixed and variable expenses for the Territories remained the same as for the Provinces. However, by virtue of using different vehicle classes, total costs are higher than for the Provinces.

The Territories usually display more elevated costs for fuel due to the higher costs of transportation and servicing. At the same time, by adding pick-up trucks and eliminating the more fuel-efficient compact and mid-size classes, overall fuel consumption is also higher than for the ten Provinces.

In terms of vehicle maintenance, adjustments were also made to reflect the extra equipment necessary for safe driving in the North, as well as use of special off-road or winter tires. The extra equipment that most acutely influences total maintenance costs for the Territories includes, but is not limited to, winter preparation packages, specialized tires, off-road survival kits and specialized signalling and communication devices, use of special engine oils and other freeze resistant liquids. For this reason, preventative maintenance and repair costs were increased by 25% and tire costs by 50% for the Territories.

7       Operating Cost Summary and Recommendations

We recommend continuing the practice of reimbursing government-requested personal vehicle use on the basis of both fixed and variable expenses, referred to as the Travel rate. At the same time we recommend that reimbursement of employee-requested personal vehicle use be based only on variable expenses, referred to as the Commuting rate. This is consistent with current practice. All values have been rounded up to the nearest 0.5 cents.

The following table provides calculated evaluations for both Travel and Commuting rates, as well as rates determined in the previous Annual Study and the latest Fuel Update, for comparison. 

2016 Reimbursement Schedule (in dollars per kilometre)

Province/Territory

Current Annual
Travel Rate

1 Oct 2015 Fuel Update Travel Rate

1 Jan 2015 Annual Report
 Travel Rate

Current Annual Commuting Rate

1 Oct 2015  Fuel Update Commuting Rate

1 Jan 2015 Annual Report
Commuting Rate

Alberta

$0.440

$0.445

$0.450

$0.180

$0.185

$0.185

British Columbia

$0.475

$0.485

$0.485

$0.205

$0.215

$0.215

Manitoba

$0.470

$0.470

$0.475

$0.185

$0.190

$0.200

New Brunswick

$0.480

$0.490

$0.495

$0.185

$0.200

$0.205

Newfoundland and Labrador

$0.515

$0.520

$0.525

$0.190

$0.205

$0.210

Nova Scotia

$0.485

$0.495

$0.505

$0.185

$0.200

$0.210

Ontario

$0.540

$0.550

$0.555

$0.185

$0.200

$0.205

Prince Edward Island

$0.470

$0.485

$0.495

$0.185

$0.200

$0.210

Quebec

$0.500

$0.505

$0.510

$0.200

$0.215

$0.220

Saskatchewan

$0.460

$0.465

$0.470

$0.185

$0.190

$0.200

Northwest Territories

$0.585

$0.615

$0.625

$0.265

$0.275

$0.285

Nunavut

$0.590

$0.610

$0.610

$0.270

$0.270

$0.270

Yukon

$0.595

$0.605

$0.625

$0.265

$0.255

$0.280

The current (2016) Travel rates show minimal to moderate variations versus the Travel rates from the previous Annual Report (for publication on January 1st 2015), ranging from decreases of 4 cents per kilometre in the Northwest Territories to 0.5 cents per kilometre in Manitoba. The main cause for these variations is represented by fluctuations in gasoline prices during the past year, with cost of ownership and maintenance having only a slight effect, which is more pronounced for the Territories.

On the other hand, as compared to the rates published in the previous-year Annual Report (for publication on January 1st 2015), Commuting rates have ranged between a decrease of 2.5 cents per kilometre in Prince Edward Island and Nova Scotia to no change in Nunavut.

In conclusion, Travel and Commuting Rates have decreased slightly across Canada. The main factors that led to the decrease in vehicle-related costs are lower fuel prices and a stronger-than-average vehicle resale market, with a more pronounced effect in the Territories due to the use of pick-up trucks in our calculations. The insurance, registration and vehicle maintenance components only had a minimal effect on reimbursement rates. All future changes in fuel prices will be reflected in the three subsequent Fuel Updates for 2016.