CFS Annual Report - 2020

Reimbursement for
Business Use of Personal Vehicles
Model Year 2020

 Study prepared for
The Treasury Board of Canada Secretariat

 by
Corporate Fleet Services

  November 2019

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 2020 model year vehicles and accounts for all of the following:

• 2020 model year vehicle prices for six different vehicle classes (compact, mid-size, minivan, small crossover/SUV, medium crossover/SUV and electric vehicles – which include Battery Electric and Plug-in Hybrid Electric vehicles)
• additionally, a light-duty truck class was used for the evaluation in the Territories
• prevalent manufacturer rebates, interest rates and residual values
• top-selling vehicle models by 2019 Canadian sales (September year-to-date) in each class studied, for a total of 60 vehicles
• cash purchases, financing and lease contracts, according to their respective share of the market
• updated vehicle insurance premium rates
• updated vehicle registration and licensing rates
• updated fuel price data and fuel consumption parameters
• updated preventative maintenance, repairs, tires and miscellaneous expenses

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 2020 for:

• travel rates (government-requested use for business of a personal vehicle by government employees)
• commuting rates (employee-requested and government-approved use of a personal vehicle)

These rates are given on a 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.

Weighted average nationwide costs of operating personally owned or leased vehicles were determined to be $0.535 per kilometre, as compared to $0.540 in previous Fuel Update (for publication on October 1^st 2019) and $0.545 in the previous year Annual Report (for publication on January 1^st 2019). A slight overall decrease in ownership costs and fuel prices was generally counterbalanced by a small increase in insurance prices.

The following table indicates Canadian average expenses by cost component as calculated in the current study, in dollars per kilometre, before rounding up to the nearest half-cent:

Cost component	Cost (dollars/km)
Depreciation	$0.180
Interest	$0.018
Acquisition Sales Tax	$0.038
Registration	$0.007
Insurance	$0.087
Fuel	$0.103
Preventative Maintenance	$0.050
Repairs	$0.017
Tires	$0.013
Miscellaneous	$0.007
Maintenance Sales Tax	$0.011
Total	$0.531

 

The largest component of vehicle operating expenses is ownership (depreciation, interest and acquisition sales tax), which accounts for 44.4% of total costs, followed by fuel expenses at 19.4%.

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 as well as subsequent Fuel Updates. 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 in use since 1999. 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 that were similarly used in the previous Annual Report. 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

• Ownership
  • depreciation
  • prevalent retail rebates
  • financing methods
  • prevalent interest rates
  • applicable sales taxes
  • projected resale values
• Registration and licensing
• Insurance 

2. Variable expenses

• Fuel
• Vehicle maintenance
  • Preventative maintenance
  • Projected costs of repairs beyond manufacturer warranty
  • Tires
  • Miscellaneous 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 current 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:

• DRIVER: 45 years old, both male and female, married, with more than 20 years of driving experience, a clean driving record (no accidents in the last 5 years), employed full-time, with post-secondary education
• VEHICLE: 2020 Toyota RAV4 LE AWD, with a total cost of $32,005 plus applicable taxes, financed by Toyota Financial Services, driven a projected 20,000 kilometres per year, having up to 15% business use and driving an average of 15 km to work every day
• COVERAGE: Third-party liability ($1,000,000 for all Provinces and Territories, comprehensive and collision coverage included with a minimum available deductible, typically between $250 and $500, based on individual insurance company offerings)

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

Expense	Cost Proportion
Acquisition Sales tax	7.2%
Depreciation	33.9%
Fuel	19.4%
Insurance	16.4%
Interest	3.5%
Maintenance Sales Tax	2.0%
Preventative Maintenance	9.5%
Registration	1.3%
Repairs	3.2%
Tires	2.4%
Miscellaneous	1.2%

3.2     Vehicle Selection

In order to be reflective of the Canadian marketplace we have performed a thorough study throughout all Provinces and Territories, focusing on 60 vehicle models (nameplates) grouped under six vehicle classes for the Provinces, and three classes for the Territories (small crossovers/SUVs, medium crossovers/SUVs and light duty 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:

• The study covers the following categories of vehicles, prevalent in the Canadian automotive landscape:
  • Compact sedans
  • Mid-size sedans
  • Minivans
  • Small crossovers/SUVs
  • Medium crossovers/SUVs
  • Electric vehicles (both Battery Electric and Plug-in Hybrids)
  • Light duty pick-up trucks (for the Territories only)

• For each of these categories, ten vehicle models from the most relevant manufacturers (according to sales in Canada) were studied, covering approximately 74% of the Canadian market for their respective classes. The Minivan and Pick-up Truck classes only contain five nameplates each, due to the lower number of available models on the Canadian market. However, consistent with the past approach, no luxury or executive vehicles have been considered in this study, as it is our opinion they do not reflect the typical vehicle choice of the average government employee.
• In order to accurately account for costs of all the nameplates studied, each vehicle was assigned a percentage weight directly proportional to total year-to-date sales as of September 2019. Subsequently, all costs, both fixed and variable, were averaged per Province or Territory according to the weight assigned to each vehicle.
• Following is a table listing the vehicles studied, as well as the class they belong to and the weight assigned to each according to recent Canadian sales for the ten Provinces:

Make	Model	Class	Weight for Provinces	2020 Model Year Pricing*
Honda	Civic	Compact	7.4%	$24,645
Toyota	Corolla	Compact	5.6%	$24,935
Hyundai	Elantra	Compact	4.5%	$22,259
Mazda	3	Compact	2.6%	$26,995
Volkswagen	Golf	Compact	2.1%	$28,685*
Volkswagen	Jetta	Compact	2.0%	$27,180*
Kia	Forte	Compact	1.8%	$22,640
Kia	Soul	Compact	1.4%	$24,690
Chevrolet	Cruze	Compact	1.2%	$23,895*
Subaru	Impreza	Compact	1.0%	$26,345
Toyota	RAV4	Small Crossover/SUV	7.4%	$32,005
Honda	CR-V	Small Crossover/SUV	6.5%	$32,305*
Ford	Escape	Small Crossover/SUV	4.6%	$31,899
Nissan	Rogue	Small Crossover/SUV	4.5%	$30,913
Hyundai	Tucson	Small Crossover/SUV	3.4%	$29,809
Mazda	CX-5	Small Crossover/SUV	3.1%	$31,745*
Hyundai	Kona	Small Crossover/SUV	2.9%	$25,009
Ford	Edge	Small Crossover/SUV	2.4%	$38,149
Chevrolet	Equinox	Small Crossover/SUV	2.2%	$31,690
Volkswagen	Tiguan	Small Crossover/SUV	2.2%	$33,360
Toyota	Camry	Mid-Size	1.7%	$28,365
Honda	Accord	Mid-Size	1.4%	$30,145
Ford	Fusion	Mid-Size	1.1%	$30,735
Chevrolet	Malibu	Mid-Size	0.7%	$26,998
Hyundai	Sonata	Mid-Size	0.5%	$26,709*
Nissan	Altima	Mid-Size	0.4%	$29,913
Kia	Optima	Mid-Size	0.2%	$30,190
Subaru	Legacy	Mid-Size	0.2%	$28,045
Mazda	6	Mid-Size	0.2%	$29,145*
Buick	Regal	Mid-Size	0.1%	$33,795
Dodge	Grand Caravan	Minivan	3.4%	$33,640*
Toyota	Sienna	Minivan	1.8%	$37,360
Honda	Odyssey	Minivan	1.1%	$38,105
Kia	Sedona	Minivan	0.6%	$33,790
Chrysler	Pacifica	Minivan	0.5%	$39,140
Jeep	Wrangler	Medium Crossover/SUV	2.9%	$38,935
Hyundai	Santa Fe	Medium Crossover/SUV	2.3%	$34,309
Jeep	Grand Cherokee	Medium Crossover/SUV	2.2%	$47,790
Toyota	Highlander	Medium Crossover/SUV	1.5%	$41,610*
Dodge	Durango	Medium Crossover/SUV	1.2%	$47,540
Ford	Explorer	Medium Crossover/SUV	1.0%	$47,049
Toyota	4Runner	Medium Crossover/SUV	0.9%	$49,935
Honda	Pilot	Medium Crossover/SUV	0.9%	$43,105
Chevrolet	Traverse	Medium Crossover/SUV	0.7%	$40,998
Nissan	Pathfinder	Medium Crossover/SUV	0.7%	$38,313
Toyota	Prius Prime	Battery Electric/Plug-in Hybrid	0.6%	$34,735
Mitsubishi	Outlander PHEV	Battery Electric/Plug-in Hybrid	0.5%	$45,648
Chevrolet	Volt	Battery Electric/Plug-in Hybrid	0.4%	$41,895*
Nissan	Leaf	Battery Electric/Plug-in Hybrid	0.4%	$38,748*
Chevrolet	Bolt	Battery Electric/Plug-in Hybrid	0.3%	$46,798
Hyundai	Ioniq PHEV	Battery Electric/Plug-in Hybrid	0.2%	$34,009*
Volkswagen	e-Golf	Battery Electric/Plug-in Hybrid	0.1%	$38,405
Kia	Soul EV	Battery Electric/Plug-in Hybrid	0.1%	$44,390
Honda	Clarity PHEV	Battery Electric/Plug-in Hybrid	0.1%	$41,755*
Kia	Niro	Battery Electric/Plug-in Hybrid	0.1%	$35,760*

 * Note: The current study used 2019 model-year pricing for vehicles for which prices were not yet available for 2020 model-year. All prices are given before applicable taxes.

• 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
Battery Electric/Plug-in Hybrid	3%
Compact	30%
Medium Crossover/SUV	14%
Mid-size	6%
Minivan	8%
Small Crossover/SUV	39%

 

Distribution of vehicles studied by brand name

Brand Name	Distribution
Chevrolet	5.6%
Chrysler	0.5%
Dodge	4.6%
Ford	9.1%
Honda	17.4%
Hyundai	13.8%
Jeep	5.1%
Kia	4.3%
Mazda	5.9%
Mitsubishi	0.5%
Nissan	5.9%
Subaru	1.2%
Toyota	19.6%
Volkswagen	6.4%

• ­For the three Territories, a different sample range of vehicles was studied to account for their particularities, as described in Section 6: Operational Costs in the Territories.

• All costs have been calculated separately for:

  • 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, consistent with the methodology employed in the previous year’s 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 8,357,600 light duty vehicles registered in Ontario in 2019, whereas in the Yukon there were only 34,787 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 contribute more to the overall weighted average. For example, the Honda Civic sells considerably more units in Canada than a Volkswagen Golf, more than triple the 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 2020 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 fourteen (14) vehicle models out of a total of 60. For these, 2019 model-year values were used, as in our experience these values vary only slightly from year to year and are generally reflective of 2020 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 for vehicles studied increased by approximately 2.05% as 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. A period of one year was used as retail rebates vary from month to month as well as display variation by:

• Vehicle model
• Province or Territory
• Type of acquisition (cash, finance or lease)
• Model trim

All the data obtained was integrated into a 2,340 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 $8,500, depending primarily on each manufacturer’s marketing strategy, with an average of approximately $1,098. In general, rebates have seen a substantial increase from the previous year, especially for the financing and lease methods of acquisition.

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:

• Air conditioning - $100 (federal)
• Tire, environmental and other levies - $0-$27 (provincial)

All applicable fees and levies have been factored in the analysis.

4.1.1.4       Provincial and federal rebates for electric vehicles

Two Canadian Provinces (British Columbia and Quebec) currently offer additional government-funded rebates for the acquisition of a Battery Electric (BEV) or Plug-in Hybrid Electric vehicles (PHEV). Rebates offered by British Columbia range between $1,500 and $3,000 while Quebec rebates are as high as $4,000 to $8,000 per vehicle.

Additionally, the Federal Government introduced an electric vehicle incentive in May 2019, applicable across Canada. Battery Electric as well as Plug-in Hybrid Electric vehicles with battery capacity of at least 15kWh (equal to a range of 50km or more) are eligible for a rebate of $5,000. Plug-in Hybrid Electric vehicles with a shorter range are eligible for a $2,500 rebate.

Where applicable, Federal and Provincial rebates vary by a number of factors, such as battery capacity, vehicle size and MSRP cost. All these particular variations were integrated in the study accordingly. The following table lists all applicable federal and provincial ‘green vehicle’ rebates, by model, at the time of the present study:

Province of application	Make	Model	Type	Provincial rebate
British Columbia	Toyota	Prius Prime	PHEV	$1,500
	Mitsubishi	Outlander PHEV	PHEV	$1,500
	Chevrolet	Volt	PHEV	$3,000
	Nissan	Leaf	BEV	$3,000
	Chevrolet	Bolt	BEV	$3,000
	Hyundai	Ioniq PHEV	PHEV	$1,500
	Volkswagen	e-Golf	BEV	$3,000
	Kia	Soul EV	BEV	$3,000
	Honda	Clarity PHEV	PHEV	$1,500
	Kia	Niro	PHEV	$1,500
Quebec	Toyota	Prius Prime	PHEV	$4,000
	Mitsubishi	Outlander PHEV	PHEV	$4,000
	Chevrolet	Volt	PHEV	$8,000
	Nissan	Leaf	BEV	$8,000
	Chevrolet	Bolt	BEV	$8,000
	Hyundai	Ioniq PHEV	PHEV	$4,000
	Volkswagen	e-Golf	BEV	$8,000
	Kia	Soul EV	BEV	$8,000
	Honda	Clarity PHEV	PHEV	$8,000
	Kia	Niro	PHEV	$4,000
Canada-Wide (Federal)	Toyota	Prius Prime	PHEV	$2,500
	Mitsubishi	Outlander PHEV	PHEV	$2,500
	Chevrolet	Volt	PHEV	$5,000
	Nissan	Leaf	BEV	$5,000
	Chevrolet	Bolt	BEV	$5,000
	Hyundai	Ioniq PHEV	PHEV	$2,500
	Volkswagen	e-Golf	BEV	$5,000
	Kia	Soul EV	BEV	$5,000
	Honda	Clarity PHEV	PHEV	$5,000
	Kia	Niro	PHEV	$2,500

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:

• Cash purchases (up-front payment): 20%
• Financing contracts (vehicle loans): 51%
• Vehicle leases: 29%

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. It’s important to note that cash purchases went up from last year whereas financing contract went down, with leases staying relatively constant.

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:

• Cash purchase: real cost of ownership is the full price paid for the vehicle (including freight and pre-delivery inspection (PDI), all fees and levies as well as sales taxes), less the projected resale value (expected return) after the period of retention (four and five years).
• Financed vehicles: vehicles that are financed through any financial institution (through a vehicle loan) cost more than a cash purchase since interest is added to the actual price of the vehicle. Prevailing interest rates were used for all calculations as published by the different vehicle manufacturers throughout the year. The amount of interest paid was based on the assumption that upon acquisition of a new vehicle, the old vehicle is traded-in or otherwise sold and the amount applied up-front to reduce the capital cost and subsequently interest costs.
• Leased vehicles: personally leased vehicles are usually subject to closed-end lease agreements. Under these circumstances, the term ‘ownership’ does not properly define the acquisition, since the vehicle is owned by the lessor until the end of the lease term. The cost of ‘ownership’ must then be calculated according to the actual monthly payments incurred by drivers for the period of the term plus applicable sales taxes.

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 or Territory taking into account both retention periods, and the results were averaged to yield one value per vehicle, by 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:

• Vehicle manufacturer
• Vehicle model
• Province or Territory
• Form of financing (financing contract or lease)
• Period of financing or lease (48 and 60 months periods were researched)

All these variations were integrated into a 3,120 data-points matrix and subsequently reflected in the ownership costs of each vehicle, by Province and Territory.

For the current study all vehicle models studied had manufacturer-established interest rates available for 4 and 5 year financing. However, while all the manufacturers studied offered subvented leasing rates, some did not offer them for certain models on 4 and 5-year leasing terms. In these instances, average market (financial institutions or third party leasing company) rates were used.

All interest rates (financing and leasing) varied from 0% to 9.25% for manufacturers’ subvented rates, while the third-party interest rates were approximated at 8.00%. The average interest rate for lease contracts was 4.19% while the financing rate was 2.39%. Overall, interest rates remained relatively constant as compared to the previous year.

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:

• interest charged for financing or leasing
• certain fees and levies
• parts and labour for all preventative maintenance, repairs and tires

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 by Province	Combined sales taxes November 2019
Alberta	5%
British Columbia	12%
Manitoba	12%*
New Brunswick	15%
Newfoundland and Labrador	15%
Nova Scotia	15%
Ontario	13%
Prince Edward Island	15%
Quebec	14.975%
Saskatchewan	11%
Northwest Territories	5%
Nunavut	5%
Yukon	5%

* The province of Manitoba reduced the provincial sales tax (PST) from 8% to 7% effective July 1st, 2019.

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:

• Federal excise tax
• GST/HST/PST/QST
• Provincial fuel tax
• Carbon tax
• Transit tax (in some Provinces)

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 in Canada. However, a tax on insurance premiums of 9% applies to automobile insurance in the Province of Quebec, 4% in Nova Scotia and 15% in Newfoundland and Labrador, charged to consumers similarly to sales taxes. Insurance premiums given in the present study have these taxes 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. At this time, no changes in sales taxes are foreseen anywhere in Canada.

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:

• Four year-old vehicles with approximately 80,000 km
• Five year-old vehicles with approximately 100,000 km

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:

• Four and five year retention periods
• Every Canadian Province and Territory
• Each vehicle under study, assuming an average vehicle condition

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

• For cash purchases resale values were subtracted from the initial total cost of a new car
• For financing contacts, we used the assumption that vehicle owners either trade in their old vehicle or otherwise sell it and put the amount down to offset part of the payment for the new vehicle and therefore reduce the total cost of interest
• On vehicle leases however, the actual resale value of the vehicle is virtually irrelevant. Lessors typically base their depreciation calculations on projected residual values that are established directly by manufacturers. We have performed a complete research to determine these residual values for all vehicles under study, by compiling a 1,560 data-points matrix to accurately calculate total leasing costs. Over the previous year, average residual values increased by approximately 9%. Residual values show variations by:
  • Vehicle model
  • Retention periods (four and five years)
  • Model trim

On average, vehicle resale values were 2% higher than the previous year for 4-year and 3% for 5-year retention periods. The lower Canadian dollar value as compared to the U.S. dollar continues to encourage remarketers from the U.S. to purchase used Canadian vehicles, increasing the demand and, as a result, driving resale values higher.

4.1.8     Total cost of ownership calculations

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

• each vehicle under study
• all three acquisition methods (cash purchase, financing contract and leasing)
• four and five-year retention periods

A weighted average was then calculated 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, four and five year retention periods, split by depreciation costs, financing costs (interest) 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	Battery Electric/ Plug-in Hybrids	Weighted average
4-yr ownership	$0.162	$0.196	$0.211	$0.187	$0.231	$0.210	$0.189
5-yr ownership	$0.147	$0.178	$0.186	$0.171	$0.210	$0.192	$0.172
							$0.180

---

INTEREST	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrids	Weighted average
4-yr ownership	$0.008	$0.019	$0.029	$0.017	$0.029	$0.018	$0.017
5-yr ownership	$0.010	$0.023	$0.031	$0.020	$0.032	$0.021	$0.020
							$0.018

---

ACQUISITION SALES TAX	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrids	Weighted average*
4-yr ownership	$0.034	$0.040	$0.046	$0.043	$0.056	$0.048	$0.042
5-yr ownership	$0.028	$0.033	$0.038	$0.035	$0.047	$0.040	$0.035
							$0.038

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

4.1.9     Costs of ownership changes from the previous year

A general increase in MSRP prices was counterbalanced in a proportional increase in resale prices and residual values, while higher rebates available to consumers lowered ownership costs. The overall result is that for the ten Canadian Provinces total ownership costs decreased by approximately $0.006 per kilometre, while for the Territories by approximately $0.012 per kilometre.

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 respective governmental agencies. The terms registration and licensing are used interchangeably in this study.

Registration costs vary by:

• Province or Territory
• Vehicle class
• Certain other parameters (vehicle weight, cylinder capacity, excessive fuel consumption, etc.)

All these costs have been integrated in the calculations for each Province and Territory. Annual registration costs vary between $42 and $247 and contribute a weighted average of $0.007 per kilometre 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	$161.00	$0.008
New Brunswick	$143.00	$0.007
Newfoundland and Labrador	$180.00	$0.009
Nova Scotia	$122.51	$0.006
Ontario	$120.00	$0.006
Prince Edward Island	$130.00	$0.007
Quebec	$246.54	$0.012
Saskatchewan	$68.00	$0.003
Northwest Territories	$83.00	$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 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

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 as well as recent industry publications. The steps taken to determine the insurance rates used in the present study were as follows:

1. Insurance premium costs were assessed based on the average government employeeas described in Section 3.1. We requested over 280 quotes based on this established demographic directly from private insurers as well as insurance brokers. For Provinces with public insurance the data available from the governing bodies was used.
2. A thorough research of publicly available information on average insurance premiums across Canada was performed. Publications by the Insurance Board of Canada (IBC) was identified as a reliable source to benchmark current average insurance premiums in all Canadian Provinces and Territories, also substantiated by data from other publications.
3. Using the figures provided by the Insurance Board of Canada (IBC), a variability factor was added to establish the maximum threshold for individual quotes obtained for the average government employee in each Province and Territory. The variability factor represents the following:
   1. The differences between the average driver/vehicle in Canada and the average government employee.
   2. The assumption that an individual would make a choice towards the most affordable insurance option available after obtaining and comparing several insurance quotes from different insurance providers.
4. Prevalent insurance premiums were determined by averaging the quotes that fall below the established reasonable threshold for each Province and Territory.

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	$1,700	$0.085	$1,600
British Columbia	$1,625	$0.081	$1,525
Manitoba	$1,425	$0.071	$1,325
New Brunswick	$1,325	$0.066	$1,275
Newfoundland and Labrador	$1,875	$0.094	$1,950
Nova Scotia	$1,450	$0.073	$1,225
Ontario	$2,275	$0.114	$2,225
Prince Edward Island	$1,050	$0.053	$1,050
Quebec	$1,125	$0.056	$1,000
Saskatchewan	$1,500	$0.075	$1,400
Northwest Territories	$1,850	$0.093	$1,775
Nunavut	$1,825	$0.091	$1,750
Yukon	$1,475	$0.074	$1,450

 

The values obtained through the present study are deemed to be reflective of the current reality for the established demographic. Insurance rates vary between $1,050 and $2,275, with a Canadian weighted average of $0.087 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

Since May 2019, global crude prices have fluctuated from $50 to $60 USD for the West Texas Intermediate (WTI) and from $55 to $65 USD in the case of the Brent. The only exception was a brief spike in global crude prices after Saudi Arabia’s oil fields had to be shut down due to attacks from drone strikes in mid-September. However, the hike was short-lived and prices returned to the previous levels within days. As a result, the three-month peak price was recorded on September 16^th, when WTI approached $63 USD per barrel and Brent reached $69 USD per barrel. The prices then receded, reaching the three-month lowest point by early October. West Texas Intermediate bottomed out at around $52 on October 3^rd, 2019 while Brent reached the lowest point of just below $58 USD per barrel the day prior.

In general, two main factors have been affecting the oil price market in the last few months. Firstly, the U.S. and China resumed trade talks, which led to a certain optimism in the markets thus providing support for the prices. On the other hand, the concerns over the global economic slowdown weighed in on the markets, pushing commodity prices down.

Following an atypical decrease in early summer, Canadian gasoline prices remained fairly stable with seasonal factors such as decreasing demand at the end of the high-driving season and the less expensive winter fuel blend having only a minor effect.

5.1.1.1       Global Crude Oil Demand

Global economic activity has been gradually slowing down, leading the International Monetary Fund (IMF) to revise growth projections. According to the latest IMF World Economic Outlook (WEO) from October 2019, the global growth in 2019 is estimated at 3.0% – the slowest pace since the global financial crisis of 2008-2009. This is a significant reduction in comparison to the growth rate of 3.8% in 2017. The decline has happened despite the fact that numerous countries (more than thirty-five since July 2019) have eased their monetary policy to boost economic activity. The main driver for the global economic downturn this year has been the widespread slowdown in manufacturing, which began in early 2018. In addition, higher tariffs and prolonged uncertainty regarding trade policy have affected business investments and demand for capital goods such as cars. This may be suggesting that firms and households are holding back on larger item spending most likely due to the elevated economic uncertainty. Nevertheless, the services sector performance across much of the world has continued to be robust in supporting wage growth, particularly in advanced economies. Economic activity drives demand for crude oil products. Slow growth can have a significant impact on the global demand for crude oil, applying downward pressure on prices. Next year, the IMF expects the growth rate to increase to 3.4%, led mostly by a recovery in emerging markets and developing economies.

Global trade tensions are continuing to persist. The implementation of the latest tariffs between the world’s two largest economies – China and the U.S. – has further weighed on both economies as nearly all goods exchanged between the two countries are now taxed. The trade talks resumed in October, leading to a cautious but increased optimism. Although initially progressing quickly, reaching an agreement has been slower than initially anticipated. Unless an agreement is reached, there is a new wave of tariffs scheduled to take effect in mid-December. The IMF estimates that the U.S.-China trade tensions will reduce the global gross domestic product (GDP) growth by 0.8% in 2020. In addition, new U.S. tariffs targeting $7.5 billion in goods have been applied to European products such as airplanes, wines and cheese since October 2019.

Overall, advanced economies are expected to grow by 1.7% in 2019 and 2020. In the Euro Area growth has slowed down to 1.2% in 2019, but is expected to pick up to 1.4% next year, once automotive production adjusts to comply with the new emissions standards. This adjustment has been particularly pronounced in Germany, where the estimated growth rate is 0.5% this year, as compared to 1.5% in 2018, raising concerns of a possible recession. Furthermore, Europe’s fourth largest economy – Italy – is estimated to have stagnated in 2019, but is projected to return to a positive growth of 0.5% in 2020.

Although employment and consumption continue to be robust in the U.S., the country’s economic projections, just like for most other advanced economies, have been adjusted downward to 2.4% in 2019 and 2.1% in 2020 due to trade-related negative effects on the business environment as well as investments. Furthermore, the U.S. manufacturing activity dropped to a 10-year low in September as reported by the Institute for Supply Management (ISM). Since manufacturing is an energy intense sector, this suggests that oil demand is likely to slow down as well.

The U.S. has been one among many countries around the world reducing the interest rates this year. An interest rate reduction signals a weakening economy, but it also provides a near-term support for financial markets, stimulating economic activity. Since July 31^st, the U.S. Federal Reserve has reduced the overnight lending rates three times. The rates currently are set to hover between 1.50% and 1.75% as compared to 2.25% and 2.50% back in June 2019.

The Canadian economy has picked up after the slowdown observed in late 2018 and early 2019. The Bank of Canada has slightly increased the growth projection for 2019, which is now estimated at 1.5% and projected to rise to 1.7% and 1.8% in 2020 and 2021 respectively. The markets have been adjusting well to the changes in housing policies and the 2017–2018 borrowing rate increases, particularly in Quebec and Ontario where labour markets have been strong. The unemployment rate in Canada is near its historical low and wages are expected to rise due to robust activity in the service sector. On the downside, the oil sector continues to face transportation challenges and production constraints while weakness in foreign demand and escalating global trade conflicts are weighing heavily on business investments and exports. In addition, the scheduled end of vehicle production at the General Motors plant in Oshawa, Ontario, which was a major contributor to the economic activity in the area, could negatively impact the Canadian automotive industry as a whole.

Most large emerging markets and developing economies have also experienced a significant slowdown this year, including China, India, Brazil and Russia, mostly led by country-specific and short-term reasons and therefore are expected to recover in 2020. The U.S.-China trade tensions have continued to spill over to other countries. Overall, the emerging markets and developing economies are projected to grow at 3.9% this year, rising to 4.6% in 2020. China’s growth projections are still on the downside with a 6.1% estimate for this year and 5.8% for 2020.

The world economy continues to face elevated downside risks stemming from the trade barriers and heightened geopolitical tensions that could cause further disruptions in the supply chains and hamper investments and growth. Tariffs cost consumers money. When consumers have less money to spend, they buy fewer goods and the overall economy slows down.

In line with the reduced growth projections, the global demand for oil has also been revised and is now projected to average 99.80 million barrels per day (mb/d) in 2019, according to the latest OPEC Monthly Oil Market Report published in November 2019. Nevertheless, the demand is expected to grow by 1.1% in 2020 averaging 100.88 mb/d.

The OPEC's reference basket price (calculated as a weighted average of prices of crude oil produced by OPEC countries) averaged $59.91 USD per barrel in October as compared to $64.71 USD per barrel in July 2019. In a year-to-year perspective, the reference basket value dropped by 22.7% as compared to $79.39 USD per barrel in October 2018.

5.1.1.2       Global Crude Oil Supply

The geopolitical unrest continues in the Middle East, having both direct and indirect effects on the oil market. The most notable event in the past three-months was a drone strike on Saudi Arabia’s oil fields on September 15^th by Yemeni rebels. The attack temporarily affected 5.7 mb/d of crude production capacity which is over 5% of the global supply. On the first trading day the Brent price spiked by as much as 20% – the largest price gain since Saddam Hussein invaded Kuwait in 1990. The price nevertheless receded quickly as it became clear that the damage would not cause any long-lasting oil supply disruptions. To offset the oil price hike impact in the U.S. – particularly in areas of the country more reliant on imported fuel such as the Northeast, President Trump authorized using oil from the Strategic Petroleum Reserve — the world's largest backup oil supply of 645 million barrels. While initial reports projected that the repairs could take weeks or even months, the facilities were repaired promptly and resumed normal operations by early October. Other events, such as the U.S. withdrawing forces from Syria as well as Turkey launching an attack on the U.S.-allied Kurds in the area, has had rather indirect and complex effects – on one hand increasing the instability in the region, on the other hand reducing the tensions between the U.S. and Iran. Such instability causes oil price fluctuations due to an increasing risk premium on possible supply disruptions in the region.

The conformity to the agreement between OPEC, Russia and nine other non-OPEC countries (collectively referred to as the OPEC+ coalition) to reduce output by 1.2 million barrels per day has remained strong throughout most of 2019, providing support to global crude prices. However, the OPEC+ coalition has sent mixed signals to the market as to whether larger cuts beyond the 1.2 mb/d would be implemented in 2020, thus causing price fluctuations. While Saudi Arabia has indicated that it will do everything needed to support the current oil prices, Russia has been much more cautious, expressing support only to extend the current production limits. The next OPEC meeting is scheduled for December 5^th 2019 at which time there should be more clarity as to the further course beyond March 2020 when the current agreement expires.

While OPEC has been limiting crude production, other countries including the U.S. and Canada have continued to increase their supply. The latest Short-Term Energy Outlook (STEO) published by the U.S. Energy Information Agency (EIA) in November 2019 indicates that the U.S. crude production is estimated to average 12.29 mb/d, an increase of 11.8% over the 2018 level, and is projected to rise to 13.29 mb/d in 2020. In the last decade, the U.S. has more than doubled oil production, making it the world’s largest producer. A report published by Canadian Association of Petroleum Producers also indicates a steady growth of crude production in Canada – from 4.59 mb/d in 2018 to 4.94 mb/d in 2020 or a 7.6% rise over a two-year period. In addition, Norway has launched a large oil project that will add 0.4 mb/d to the market by mid-2020. According to the EIA, the global oil supply will average 100.87 mb/d in 2019, increasing further by 1.7% in 2020, while the OPEC supply is expected to fall by 1.9% from 35.22 mb/d in 2019 to 34.56 mb/d next year.

Organization for Economic Co-operation and Development (OECD) commercial stocks in August increased for the fifth consecutive month, approaching the record level of three billion barrels seen during most of 2016. As a result, the International Energy Agency has indicated that there is a chance of oversupply in 2020 due to a production boost amidst the weak growth in demand that could lead to oil prices sliding lower next year.

In August 2019, Alberta announced that it will extend the oil production curtailment policy until December 2020. The decision has largely been brought on because of delays with the Enbridge’s Line 3 Expansion project to the U.S. Midwest, which once opened would add 370,000 barrels of export capacity daily. It has been estimated that without the production limits, there would be a surplus production of 150,000 barrels per day in excess of the current export capacity. The curtailment policy extension comes with adjustments on the total daily limit from 3.56 mb/d in January to 3.81 mb/d by December 2019. In addition, the exemption limit was increased from 10,000 to 20,000 barrels per day per operator.

The spread between the WTI and Western Canadian Select (WCS) remained at $15 USD between July and October 2019, thanks to the production curtailments as well as increased shipments of oil by rail that led to falling oil inventories in Western Canada. However, a significant spill from the Keystone 1 pipeline at the end of October disrupted the flow of oil for nearly two weeks, causing the Canadian crude price to fall to approximately $20 USD per barrel below WTI. By the end of November, the spread was reduced to about $18.50 USD per barrel.

5.1.2     Gasoline prices across Canada

This year, gasoline prices saw an unusual pattern when fuel price rose rapidly in spring and subsided in the early summer. Fuel prices have remained fairly constant since July 2019, largely reflecting the oil price patterns. Notably, the end of the high driving season as well as the arrival of the less-expensive winter-grade gasoline had only a slight effect on gasoline prices.

In the three-month period between September and November, the average fuel prices generally decreased across Canada with the exception of British Columbia and the Yukon. The Canadian average fuel price for the period was $1.199, a decrease of 4.6 cents from the previous Fuel Update (August 2019, for publication on October 1^st 2019). The largest drop was observed in Saskatchewan (8.3 cents), Quebec (6.9 cents) and Alberta (6.7 cents). A slight increase of 0.4 cents was recorded in British Columbia as well as 2.3 cents in the Yukon.  Prices in Nunavut remained constant.

Fuel contributes on average 10.3 cents per kilometre to total operating costs, ranging from 8.6 cents in Alberta to 16.9 cents in the Yukon. With the continued volatility of the energy markets, determined by global factors that are hard to forecast, it is difficult to make any prediction regarding gasoline prices for the next three-month period. However, any future changes will be reflected in the subsequent Fuel Update.

Prices of gasoline, in Canada, include all applicable taxes. Prices vary significantly across the country, 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 via Kent Marketing, based on daily published fuel prices for 78 locations across Canada. This data was verified against additional databases that similarly track fuel prices all across Canada.

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.

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. Prices were tracked daily across Canada (except for Saturdays, Sundays and holidays).

Fuel price data was extracted for a period of three months (August 23^rd to November 15^th 2019) in order to better reflect current prices. Gasoline prices in Canada varied during this period between $0.916 in Edmonton, AB to $1.659 in Vancouver, BC, with a national average of $1.199. Subsequent Fuel Update reports will focus on three-month periods following the period covered in the present study.

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

Province/Territory	Current average fuel price ($/litre)	Current average fuel cost ($/km)	1 Oct 2019 update ($/litre)	1 Jul 2019 update ($/litre)	1 Apr 2019 update ($/litre)	1 Jan 2019 (Annual Report) ($/litre)
Alberta	$0.993	$0.086	$1.060	$1.169	$0.973	$1.213
British Columbia	$1.480	$0.129	$1.476	$1.548	$1.319	$1.476
Manitoba	$1.089	$0.095	$1.135	$1.173	$0.944	$1.116
New Brunswick	$1.185	$0.103	$1.226	$1.239	$1.042	$1.240
Newfoundland and Labrador	$1.225	$0.106	$1.260	$1.289	$1.112	$1.302
Nova Scotia	$1.133	$0.098	$1.166	$1.228	$1.005	$1.201
Ontario	$1.166	$0.101	$1.222	$1.214	$1.020	$1.228
Prince Edward Island	$1.151	$0.100	$1.199	$1.205	$1.009	$1.225
Quebec	$1.217	$0.106	$1.286	$1.300	$1.107	$1.303
Saskatchewan	$1.084	$0.094	$1.167	$1.199	$0.991	$1.199
Northwest Territories	$1.328	$0.157	$1.361	$1.326	$1.244	$1.453
Nunavut	$1.127	$0.133	$1.127	$1.134	$1.144	$1.097
Yukon	$1.429	$0.169	$1.406	$1.342	$1.261	$1.438

 

Gas prices in Nunavut are typically set for a full calendar year and rarely exhibit any changes. The latest change occurred on April 1^st 2019 and the Territorial average was determined to be to $1.127 for the current study.

5.1.3     Fuel consumption

For each vehicle under study, fuel consumption figures were extracted from two main sources, namely Natural Resources Canada’s EnerGuide and the industry’s vehicle pricing and specification standard tool, AutoQuote. For models where 2020 model year figures were not available, 2019 figures with similar engine sizes were used. These figures were correlated back to last year’s consumption figures to check for consistency. Fuel consumption figures are determined by vehicle manufacturers, based on standardized tests, and are published for both city driving and highway driving. For Battery-Electric and Plug-in Hybrid Electric vehicles, the EnerGuide provides figures for fuel consumption by using a litre-equivalent (Le/100 km) system, thus facilitating the comparison with conventional fuel vehicles.

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 55/45 city/highway split, consistent with the methodology used by the EnerGuide. 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:

Combined fuel consumption (l/100 km)	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrid	Pick-up Truck	Weighted average
Provinces	7.3	7.8	11.3	8.7	11.2	4.8	-	8.7
Territories	-	-	-	8.3	10.4	-	11.2	9.9

 

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 fuel 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 $0.103 per kilometre to total operating costs, ranging from $0.086 in Alberta to $0.169 in the Yukon. 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:

• preventative maintenance (that has to be performed regularly)
• repairs outside of manufacturer warranty and not caused by accidents
• an additional set of tires
• miscellaneous expenses

5.2.1     Preventative maintenance

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

• oil changes
• regular check-ups
• tire rotation
• spark plugs change
• front and rear brakes cleaning
• discs and pads replacement
• wheel alignment
• battery change
• cabin filter replacement
• air-intake filter replacement

Costs of preventative maintenance were estimated based on consultation with specialized garages and qualified mechanics in order to determine the frequency and costs for parts and labour. 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. Repairs not covered by manufacturer warranty have been accounted for in the present study accordingly.

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 quality all-seasons tires were considered. Costs of tires vary between $852 and $1,268 for a set of four with installation included, mainly depending on the type and size, plus applicable taxes.

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 1^st and March 15^th. 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 1^st and March 31^st. 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 allocated a $133 per year 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 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 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	Battery Electric/ Plug-in Hybrid	Weighted Average*
4–yr ownership	$0.046	$0.046	$0.052	$0.048	$0.053	$0.038	$0.048
5–yr ownership	$0.051	$0.051	$0.056	$0.053	$0.057	$0.042	$0.053
							$0.050

 ---

REPAIRS	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrid	Weighted average*
4-yr ownership	$0.010	$0.010	$0.011	$0.010	$0.010	$0.007	$0.010
5-yr ownership	$0.022	$0.025	$0.028	$0.024	$0.026	$0.020	$0.024
							$0.017

 ---

TIRES	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrid	Weighted average*
4-yr ownership	$0.012	$0.014	$0.015	$0.015	$0.018	$0.014	$0.014
5-yr ownership	$0.010	$0.011	$0.012	$0.012	$0.015	$0.011	$0.012
							$0.013

 ---

MISCELLANEOUS	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrid	Weighted average*
4-yr ownership	$0.007	$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
							$0.007

 ---

MAINTENANCE SALES TAX	Compact	Mid-Size	Minivan	Small Crossover/ SUV	Medium Crossover/ SUV	Battery Electric/ Plug-in Hybrid	Weighted average*
4-yr ownership	$0.009	$0.009	$0.010	$0.010	$0.011	$0.008	$0.010
5-yr ownership	$0.011	$0.012	$0.013	$0.012	$0.013	$0.010	$0.012
							$0.011

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 cars, 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:

• Small crossovers/SUVs
• Medium crossovers/SUVs
• Pick-up trucks

The study kept the vehicles studied in the Small and Medium crossover/SUVs categories, added the five most sold pick-up trucks in the Truck category and eliminated the Compact, Mid-size and Electric vehicle 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	2020 Model Year Pricing*
Toyota	RAV4	Small Crossover/SUV	7.9%	$32,005
Honda	CR-V	Small Crossover/SUV	6.9%	$32,305*
Ford	Escape	Small Crossover/SUV	4.9%	$31,899
Nissan	Rogue	Small Crossover/SUV	4.8%	$30,913
Hyundai	Tucson	Small Crossover/SUV	3.7%	$29,809
Mazda	CX-5	Small Crossover/SUV	3.3%	$31,745*
Hyundai	Kona	Small Crossover/SUV	3.1%	$25,009
Ford	Edge	Small Crossover/SUV	2.5%	$38,149
Chevrolet	Equinox	Small Crossover/SUV	2.3%	$31,690
Volkswagen	Tiguan	Small Crossover/SUV	2.3%	$33,360
Jeep	Wrangler	Medium Crossover/SUV	3.1%	$38,935
Hyundai	Santa Fe	Medium Crossover/SUV	2.4%	$34,309
Jeep	Grand Cherokee	Medium Crossover/SUV	2.3%	$47,790
Toyota	Highlander	Medium Crossover/SUV	1.6%	$41,610*
Dodge	Durango	Medium Crossover/SUV	1.3%	$47,540
Ford	Explorer	Medium Crossover/SUV	1.1%	$47,049
Toyota	4Runner	Medium Crossover/SUV	1.0%	$49,935
Honda	Pilot	Medium Crossover/SUV	0.9%	$43,105
Chevrolet	Traverse	Medium Crossover/SUV	0.7%	$40,998
Nissan	Pathfinder	Medium Crossover/SUV	0.7%	$38,313
Ford	F-Series	Truck	18.7%	$46,969
Ram	P/U	Truck	11.3%	$49,490
GMC	Sierra	Truck	5.9%	$47,698
Chevrolet	Silverado	Truck	5.5%	$46,998
Toyota	Tacoma	Truck	1.5%	$45,565

* Note: The current study used 2019 model-year pricing for vehicles for which prices were not yet available for the 2020 model-year.

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 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, as well as increased idling. For this reason, repair costs were increased by 25%, tire costs by 50% and fuel costs by 20% 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 rates 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 Report and the latest Fuel Update, for comparison.

2020 Reimbursement Schedule (in dollars per kilometre)

	Travel Rate			Commuting Rate
Province/Territory	Current Annual Report	October 1st  2019 Fuel Update	January 1st 2019 Annual Report	Current Annual Report	October 1st  2019 Fuel Update	January 1st 2019 Annual Report
Alberta	$0.475	$0.480	$0.495	$0.180	$0.185	$0.200
British Columbia	$0.540	$0.545	$0.545	$0.230	$0.230	$0.230
Manitoba	$0.505	$0.510	$0.515	$0.190	$0.195	$0.195
New Brunswick	$0.525	$0.535	$0.535	$0.205	$0.210	$0.210
Newfoundland and Labrador	$0.560	$0.575	$0.575	$0.205	$0.210	$0.215
Nova Scotia	$0.525	$0.525	$0.530	$0.200	$0.200	$0.205
Ontario	$0.565	$0.570	$0.570	$0.200	$0.205	$0.205
Prince Edward Island	$0.510	$0.520	$0.525	$0.200	$0.205	$0.210
Quebec	$0.535	$0.540	$0.540	$0.215	$0.220	$0.220
Saskatchewan	$0.500	$0.510	$0.510	$0.190	$0.200	$0.200
Northwest Territories	$0.620	$0.645	$0.660	$0.270	$0.290	$0.300
Nunavut	$0.595	$0.615	$0.610	$0.245	$0.260	$0.255
Yukon	$0.610	$0.635	$0.640	$0.285	$0.295	$0.300

 Note: All figures were rounded up to the nearest half-cent.

The current Travel Rates (for publication on January 1^st 2020) show moderate variations versus the Travel Rates from the previous Fuel Update (for publication on October 1^st 2019), ranging from a decrease of 2.5 cents per kilometre in the Northwest Territories and the Yukon to no changes in Nova Scotia. On the other hand, as compared to the rates published in the previous Fuel Update, Commuting rates have ranged between a decrease of 2.0 cents per kilometre in the Northwest Territories to no change is British Columbia and Nova Scotia.

Year-over-year, as compared to the previous Annual Report (for publication on January 1^st 2019), Travel Rates have decreased between 4.0 cents per kilometre in the Northwest Territories and 0.5 cents per kilometre in British Columbia, Nova Scotia, Ontario and Quebec, while the Commuting Rates varied between a decrease of 3.0 cents per kilometre in the Northwest Territories to no change in British Columbia.

In conclusion, overall both the Travel and Commuting Rates have decreased slightly across Canada as compared to the previous Fuel Update (for publication on October 1^st 2019), with the exception of Nova Scotia, where both reimbursement rates have remained constant, as well as British Columbia where the Commuting Rate has also not changed. The main factors that led to a moderate decrease in vehicle-related costs for most Provinces and Territories are slightly lower ownership costs, supported by increased rebates as well as lower fuel prices. On the other hand, slightly higher insurance premiums counterbalanced this trend across Canada and more significantly in Nova Scotia and Quebec. All other cost components had only a minimal effect on reimbursement rates.

While most other cost components remain fairly constant over a course of a year, fuel prices fluctuate significantly on a daily basis. With the continued volatility of the energy markets, determined by global factors that are hard to forecast, it is difficult to make any prediction regarding future gasoline prices. Therefore fuel price updates will be carried out every three months. All future changes in fuel prices and sales taxes will be reflected in the subsequent Fuel Updates.